Global credit ratings agency Fitch has affirmed Export-Import Bank of India’s long-term Issuer Default Rating (IDR), with a stable outlook, on the back of the bank’s good financial condition.
Fitch also took into account the Exim Bank’s role in supporting the government’s foreign trade policies and ownership by the state.
“Exim’s ratings are equal with the Indian sovereign, given its role in supporting the government’s foreign trade policies and 100 per cent ownership by the government...
Exim’s financial condition compares well with that of commercial banks in India,” Fitch said in a statement.
It affirmed the bank’s long-term IDR at ‘BBB—’ with a stable outlook. ‘BBB’ denotes a moderate default risk relative to other issuers or obligations in the same country.
Fitch said the bank’s return on assets at 1.1 per cent in the last fiscal was higher than the average for commercial banks in India.
“Asset quality is boosted by the guaranteed lines of credit to emerging sovereigns and refinancing lines to commercial banks, which together formed nearly 50 per cent of loans at end March 2011,” Fitch said.
The bank had a non-performing loan ratio of 1.04 per cent at the end of 2010-11.
“Its exposure to the sovereign and commercial banks carries low risk weights and enhances the Tier 1 capital ratio. The equity/assets ratio was comfortable at 9.9 per cent at end-March 2011,” the ratings agency said.
Established under an Act of Parliament to finance and facilitate the country’s foreign trade, Exim Bank routes long-term lines of credit to emerging economies on behalf of the Indian government to facilitate Indian exports to those countries.
Such lines comprised 22 per cent of the bank’s loans in the last fiscal and are guaranteed by the government.
“Exim’s governing act enables it to avail government guarantees for its borrowings. Also, the quasi sovereign status of the institution gives it strong access to domestic and international capital markets. The government has regularly infused capital to help Exim grow,” Fitch said.