CRISIL has reaffirmed ratings on debt instruments of UCO Bank. The ratings continue to reflect the expectation of strong support for UCO Bank from its majority owner, the Government of India (GoI), both on an ongoing basis and in the event of distress.

The ratings also factor in UCO Bank's large scale of operations (in terms of asset size), and its adequate capitalization. These rating strengths are partially offset by UCO Bank's modest asset quality and average resource profile.

The ratings continue to factor in the strong support that UCO Bank is likely to receive from GoI as GoI is both the majority shareholder in public sector banks (PSBs) and the guardian of India's financial system.

The stability of the banking sector is of prime importance to GoI, given the criticality of the sector to the economy, the strong public perception of sovereign backing for PSBs, and the severe political repercussions of failure of any PSB on sovereign credit-worthiness.

CRISIL believes that the majority ownership creates a moral obligation on GoI to support PSBs, including UCO Bank. Furthermore, GoI is committed to infusing capital in PSBs on an ongoing basis to ensure Tier-I capital adequacy ratio (CAR) as per Basel III requirements. Since 2008-09 (refers to financial year, April 1 to March 31), GoI has infused or committed capital of around Rs 640 billion in PSBs. UCO Bank received capital of around Rs 2.0 billion from GoI in 2013-14, indicating GoI's commitment to extend capital support to the bank.

CRISIL believes that GoI will continue to extend need-based support to UCO Bank, thus helping the bank maintain adequate capitalisation over the medium term. The outlook may be revised to 'Positive' in case of significant and sustained improvement in the bank's asset quality and earnings profile.

Conversely, the outlook may be revised to 'Negative' if the bank's resource profile weakens, or in case of significant and sustained deterioration in the bank's asset quality or earnings profile.

Shares of the company declined Rs 0.55, or 0.53%, to trade at Rs 103.55. The total volume of shares traded was 381,466 at the BSE (1.14 p.m., Wednesday).