• Rajarata Development Bank - 'BBB+(lka)';
• Ruhuna Development Bank - 'BBB+(lka)';
• Wayamba Development Bank - 'BBB+(lka)';
• Kandurata Development Bank - 'BBB(lka)';
• Uva Development Bank - 'BBB(lka)';
• Sabaragamuwa Development Bank - 'BBB-(lka)'
Fitch has also taken into consideration the RDBs' state ownership as well as their strong asset quality and sound financial profiles prior to rating.
RDBs are licensed specialized banks that were formed in the 1990s and are limited by statute to operate within their respective districts.
The banks focus on developing the rural economy by providing microfinance type lending to farmers and low income groups.
According to Fitch as at FYE05, 21 percent of RDBs loans consisted of housing loans and pawning advances also known as 'gold backed loans', where significant portion of pawning tends to be used for agricultural purposes.
The balance is microfinance-type loans extended for agricultural and small scale industrial projects.
"At FYE05 RDBs' average non-performing loans (NPLs) to gross loans were a low 6.4 percent in relation to 19.5 percent at FYE01."
The average net NPL to equity ratio was 19.2 percent at FYE05, having peaked at 61.3 percent at FYE01, the report says.
In addition, RDBs' profitability metrics were relatively high with average return on assets of 2.1 percent in FY05, and have consistently been at this level over the last few years.
However, these asset quality and profitability indicators can be impaired drastically by natural events such as droughts and floods and economic conditions due to the geographic concentration of their loan portfolios.
The funding mixes of the RDBs are relatively stable, with retail savings and time deposits making up 69 percent of total funding at FYE05 (65 percent at FYE04), with extremely low average deposit sizes for retail customers.
Refinance funding under various schemes for dedicated microfinance schemes accounted for 13.1 percent of the funding of the banks at FYE05. Over the last five years, liquidity has been declining largely due to loan growth and needs to be strengthened through deposit mobilisation and other long term funding sources.
All development banks had liquidity credit lines with each other and selected state banks to fund any short term funding requirements.
The key challenge for the banks would be to mobilise adequate funding to meet loan demand.