Credit rating agency ICRA Ltd has signed a memorandum of understanding (MoU) with Punjab National Bank (PNB) for assigning ratings to the state-run bank's enterprise borrowers.

Under the terms of the MoU, ICRA will assign ratings to PNB's small scale industries and small & medium enterprise borrowers.  The small enterprises/small scale industries ratings will be conducted under the National Small Industries Corp-ICRA performance and credit rating scheme for small scale industries.

The ratings will serve PNB as an objective and scientific input in decision making, and assist the state-run lender in risk pricing.

In a press release on Tuesday, the rating agency said, "For PNB, the ratings would serve as an objective and scientific input in decision making, and provide assistance in risk pricing, besides acting as an input in the setting of collateral requirements for borrowers."

The ratings will also facilitate the bank in hitting future deals involving collateralized bond and loan obligations.

ICRA also said that the agreement would enable the bank's enterprise borrowers to obtain the ratings at a comparatively low cost, adding that the ratings might place the rated entity in a better position to obtain competitive credit terms from the lender.