Standard & Poor's Ratings Services said Tuesday that the Indian Overseas Bank (IOB) ratings could face downward pressure if the Reserve Bank of India's (RBI) 'prompt corrective action' resulted in any further weakening of the bank's business or credit profile.

The rating agency said, 'We will continue to closely monitor the development around the prompt corrective action on IOB.'

S&P ratings said, it could also lower the rating on IOB if the bank's risk-adjusted capital ratio declines to less than 5%. This ratio could decline if IOB is unable to raise sufficient capital to support growth and economic risk in India rises.

The RBI's 'prompt corrective action' on IOB highlights the bank's weak credit profile. The rating agency's assessment of IOB's stand-alone credit profile already factors in the bank's inherent weakness in asset quality, moderate capitalization, and ongoing stress on earnings.

Commenting on the ratings, the agency said, IOB's ratings (IOB: BB+/Stable/B) continue to reflect our expectation of a ''very high'' likelihood that the Indian government will continue to provide extraordinary support to the bank.

IOB's performance has been weak over the past year or so. Stressing on the bank's aggressive growth over the past several years, the rating agency said, the bank has risked its internal control system. Its reported nonperforming loan ratio rose sharply to 9.4% as of June 30, 2015, from 5.8% as of Jun. 30, 2014, to become the highest among the Indian banks.

The resultant high credit costs have strained IOB's earnings, which remain abysmally low. Moreover, IOB's funding profile has deteriorated over the past few years. S&P lowered the assessment of IOB's stand-alone credit profile a notch to 'bb-' on Sept. 30, 2015, to reflect these weaknesses.