Fitch Ratings has assigned a final National Long-Term Rating of ‘BBB+(lka)’ to the proposed 16 billion rupee green bonds of Sri Lanka’s National Development Bank (NDB). These bonds feature a non-viability clause, allowing conversion to ordinary voting shares if a trigger event occurs.

Fitch has rated these bonds two notches below NDB’s National Long-Term Rating. This decision reflects Fitch’s baseline notching for loss severity associated with this type of debt, anticipating poor recoveries.

The bonds, compliant with Basel III standards, are subordinated, unsecured, and linked to green, social, and sustainability projects. They will mature in five and seven years and will be listed on the Colombo Stock Exchange. The proceeds are intended to bolster NDB’s Tier 2 capital and support the expansion of its loan book through financing GSS+ projects.

The inclusion of a non-viability clause means the bonds will convert to ordinary voting shares if a trigger event, as determined by the Governing Board of the Central Bank of Sri Lanka, occurs. Fitch has not added additional notching for non-performance risk, as the bonds do not include going-concern loss-absorption features.

NDB’s National Long-Term Rating serves as the anchor rating for this instrument, reflecting the bank’s standalone financial strength and the risk of non-viability. Fitch reviewed NDB’s ratings with no changes on September 8, 2025, as detailed in the commentary “Fitch Upgrades 10 Sri Lankan Banks’ National Ratings and Affirms Five after Scale Recalibration,” published on January 21, 2025.

Rating Sensitivities

Factors that Could Lead to Negative Rating Action/Downgrade: A downgrade of NDB’s National Long-Term Rating would result in a downgrade of the bond rating.

Factors that Could Lead to Positive Rating Action/Upgrade: An upgrade of NDB’s National Long-Term Rating would result in an upgrade of the bond rating.

(Colombo, February 18, 2026)