Global rating agency Fitch Ratings Tuesday affirmed the Exim Bank’s long-term rating at ‘BBB-‘ with a stable outlook, citing the government support to the developmental institution. The rating is on a par with the sovereign rating. “We view that the Exim Bank will benefit from timely state support due to its unique policy role, strong government linkages and 100 percent ownership,” the rating agency said in a note.
The government injected regular Rs 5,000 crore capital into the bank in the year to March 2019. It has budgeted an additional Rs 1,500 crore of fresh equity to be injected in FY20. The capital support from the government has improved the bank’s capital position, raising its tier 1 ratio to 11.1 percent by the third quarter of FY19 from 8.8 percent in FY18 when a sizeable loss caused a significant deterioration.
“We expect the tier 1 ratio to further improve in FY19, considering that a large chunk of capital was injected after December 2018,” the agency said. The bank also receives support in the form of interest subvention from the government on the lines of credit it extends to other countries, it said, adding these loans represent 37 percent of its loan-book in the first three quarters of FY19.
The state exercises strong oversight and control over the bank via its 100 percent ownership, which cannot be lowered unless its founding law is modified by Parliament. Its board has representation from ministries of finance, external affairs and commerce & industry.