April 20, 2017 / 7:07 AM / 9 months ago

Fitch Affirms India's EXIM at 'BBB-'; Outlook Stable

(The following statement was released by the rating agency) SINGAPORE/MUMBAI, April 20 (Fitch) Fitch Ratings has affirmed Export-Import Bank of India (EXIM)'s Long-Term Issuer Default Rating at 'BBB-'. The Outlook is Stable. Fitch has also assigned a 'BBB-' rating to EXIM's USD10 billion global medium-term note programme and the tranches of senior unsecured notes outstanding under the programme. The full list of the rating actions is provided at the end of this commentary. KEY RATING DRIVERS IDRS, SUPPORT RATING, SUPPORT RATING FLOOR AND SENIOR DEBT EXIM's IDR is equalised with that of the Indian sovereign (BBB-/Stable), reflecting the Support Rating (SR) of '2' and a Support Rating Floor (SRF) of 'BBB-'. EXIM's SR reflects Fitch's expectation of a high probability of extraordinary state support, should EXIM need it. This expectation stems from EXIM's policy role in developing India's foreign trade and strong government linkages, which are evident from the government's strong control over EXIM. This view is further underpinned by the government's track record of support to EXIM. EXIM's policy role has been set out in its establishing act (The Export-Import Bank of India Act, 1981). The act requires the government to directly own 100% of EXIM and provides for a strong government representation on its board. The presence of senior level officials from three government ministries (Ministry of Finance, Ministry of External Affairs and Ministry of Commerce and Industry) on EXIM's board demonstrate the level of control the government has over EXIM's board. Under the act, EXIM can be liquidated only with the approval of the government. The government has a history of injecting capital into EXIM, including INR13 billion in the financial year ended March 2016 (FY16), INR5 billion in FY17 and INR5 billion budgeted for FY18. The central bank also provided EXIM with special liquidity support during the global financial crisis. In addition, EXIM receives support in the form of interest subvention from the government on the line of credit (LoC) loans extended by it to other countries at the behest of the government. LoC loans formed 35% of EXIM's loan book as at end-1QFY17. Any default on EXIM's debt will likely be negative for the sovereign's reputation given the strong linkages between the two. Fitch has not assigned a Viability Rating to EXIM due to its role as a policy bank, which makes an assessment of its standalone credit profile less meaningful. The rating on the MTN programme and senior notes under the programme are at the same level as EXIM's Long-Term IDR. This is because the notes constitute direct, unsubordinated and unsecured obligations of the bank, and rank equally with all its other unsecured and unsubordinated obligations. The Stable Outlook on the rating mirrors the Stable Outlook on the sovereign rating. RATING SENSITIVITIES IDRS, SUPPORT RATING, SUPPORT RATING FLOOR AND SENIOR DEBT EXIM's ratings are sensitive to any change in the ability or propensity of the sovereign to provide support. The former is likely to be reflected in changes to the sovereign's IDRs or Outlook, while the latter is possible if there were to be a weakening of linkages between EXIM and the sovereign. This could be by way of any sustained deviation of EXIM's business model from its policy focus or through changes to EXIM's establishing act that imply a dilution in linkages with the government. However, Fitch does not expect EXIM's linkage with the sovereign to undergo any change in the near term. EXIM's senior debt rating is sensitive to changes in its IDR. FULL LIST OF RATING ACTIONS Export-Import Bank of India (EXIM): Long-Term IDR affirmed at 'BBB-'; Outlook Stable Short-Term IDR affirmed at 'F3' Support Rating affirmed at '2' Support Rating Floor affirmed at 'BBB-' USD10 billion global MTN programme assigned a 'BBB-' rating Senior unsecured notes assigned a 'BBB-' rating Contact: Primary Analyst Ambreesh Srivastava Senior Director +65 6796 7218 Fitch Ratings Singapore Pte Ltd. 6 Temasek Boulevard #35-04/05 Suntec Tower 4 Singapore Secondary Analyst Jobin Jacob Associate Director +91 22 4000 1773 Committee Chairperson Tim Roche Senior Director +61 2 8256 0310 Media Relations: Bindu Menon, Mumbai, Tel: +91 22 4000 1727, Email: bindu.menon@fitchratings.com; Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. 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