Fitch Ratings has assigned Bank of India (New Zealand) Limited (BOI NZ) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) of 'BBB-'.

The Outlook is Stable. Fitch has also assigned a Shareholder Support Rating (SSR) of 'bbb-'.

Key Rating Drivers

High Probability of Support: BOI NZ's IDRs and SSR are equalised with those of its parent, Bank of India (BOI, BBB-/Stable), to reflect Fitch's view of a high probability of support from BOI, and ultimately, from the Indian government (BBB-/Stable).

We have not assigned a Viability Rating because BOI NZ does not have a significant standalone franchise and its operations rely strongly on integration with BOI.

Highly Integrated, Strong Legal Commitment: Fitch's expectation of timely support for BOI NZ from BOI is underpinned by the high level of integration between the two entities and the parent's binding legal commitment in the form of a guarantee to support the fully owned subsidiary, as required by the New Zealand regulator. In addition, BOI NZ's small size relative to the parent also makes potential support manageable for BOI.

Rating Sensitivities

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Any change in BOI's IDR would have a similar impact on BOI NZ's IDRs, but the subsidiary's IDRs could also be downgraded by a weaker propensity of its parent and, ultimately, the Indian government, to support the subsidiary. However, the latter would first require the removal of the parent's guarantee.

The rationale for BOI's ratings is disclosed in the commentary 'Fitch Affirms Bank of India at 'BBB-'; Outlook Stable,' dated 4 October 2022.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Any upgrade in BOI's IDR, although unlikely in the near term, would have a similar effect on BOI NZ's IDRs, provided our assessment of the parent's support propensity remains unchanged.

Best/Worst Case Rating Scenario

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579

Date of Relevant Committee

24 February 2023

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings with Credit Linkage to other ratings

BOI NZ's IDRs and Outlook are the same as BOI's IDR and Outlook and directly linked via the subsidiary's SSR. It reflects our view of the high probability of extraordinary support from BOI, if needed.

ESG Considerations

BOI NZ has an ESG Relevance Score of '4' for Governance Structure. This is in line with BOI, reflecting our view that key governance aspects at BOI NZ are largely driven by the parent due to the high level of integration between BOI NZ and BOI. BOI has representation on BOI NZ's board, which also has independent members in compliance with New Zealand regulations. Even so, we believe that the parent's full ownership means it can exercise significant influence on BOI NZ's strategy and also monitor progress through the board and daily operations. However, these factors also drive our view on BOI NZ's state linkages, and support prospects and ultimately drive the long-term ratings.

BOI NZ's ESG Relevance Score of '3' for Financial Transparency differs from BOI's '4', taking into account its better transparency (including in areas such as asset quality), given it is locally audited by KPMG and complies with IFRS reporting requirements.

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

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