Mumbai, March 9: There?s bad news for Bengal. Domestic credit rating agency CARE has downgraded the rating assigned to a bond issue of West Bengal Financial Corporation (WBFC) citing deteriorating financial condition of the state as the reason.

From A-, which indicates sufficient safety, the bonds have been downgraded to BBB+, denoting adequate safety.

The two sets of WBFC bonds, which have got the rating rap, are worth Rs 40.74 crore and Rs 9.26 crore and are of the non-SLR type.

According to Reserve Bank regulations, SLR securities include gilts and gold. Bonds that do not fall under this category are of the non-SLR type.

While downgrading the bonds, CARE has factored in the chronic high level of revenue and fiscal deficit of the Bengal government, low growth in revenue receipts, very high level of committed expenditure, high debt level in relation to revenue receipts, poor debt servicing indicators and the steps taken by the state to improve the present position of finances by containing revenue expenditure.

The rating has also factored in continuous losses suffered by WBFC, high non-performing asset level, low collection efficiency but satisfactory debt servicing track record.

However, the rating is primarily based on credit enhancement in the form of unconditional and irrevocable guarantee of the state for repayment of principal and payment of interest during the full tenure of such bonds, CARE observed.

WBFC, which is under the administrative control of the finance department of the state, lends to tiny, small and medium-size enterprises to set up, expand, modernise and diversify industrial units in the state.

The corporation suffered a net loss of Rs 80 lakh on a total income of Rs 44.8 crore in 2003-04 against a net loss of Rs 30 lakh on a total income of Rs 45.3 crore in 2002-03.

CARE said the fall in the level of income and profit was due to lower interest recovery and higher NPA provisions. ?Generally, WBFC has low overall collection efficiency and high NPAs,? it added.