Commencing operations as a purveyor of export credit, like any other export credit agencies in the world, Export-Import Bank of India has come a long way since its inception in 1982. It has not only been a catalyst in the promotion of cross-border trade and investment, but has also managed to integrate the country’s foreign trade with the overall economic growth. In a freewheeling interview with The Dollar Business, Yaduvendra Mathur, Chairman & Managing Director of Exim Bank, talks about how the institution can far better and effectively serve the interests of large Indian projects – spanning railways, roads and power sectors – in neighbouring nations and Africa

Jayashankar Menon | @TheDollarBiz 

TDB: Exim Bank has the mandate to support and take forward India’s foreign trade. How, according to you, has been the progress so far, and what is your vision for the institution’s role in India’s global leadership?

YM: Exim Bank as an institution is well-geared towards accommodating the needs of the changing times. The institution has been in business as India’s premier export credit agency for more than three decades and has been conscious in its endeavour towards promoting development assistance. However, we have realised that current norms restrict Exim Bank’s funding to a single project to up to Rs.1,200 crore because of which it cannot lend to large-value projects, especially those related to railways, roads and power sectors. Such Indian projects are in demand in many neighbouring countries as well as some developing countries in Africa. Exim Bank therefore has asked the government for a 50% increase in the borrowing limit to 15 times of its net owned fund. Besides this, we have also asked for a $10-billion line of credit from forex reserves to support high value project exports from India. We hope that with these changes we will be able to better our mandate.

TDB: In FY2013, the Exim Bank’s loan book grew by 20% but net non-performing asset (NPA) was at 0.47%. Last fiscal, your loan book grew by 16% and net NPA dipped to 0.43%. At the current level of stress in the global economy, what kind of a loan book growth do you think will not impact asset quality?

YM: Exim Bank’s net NPA as percentage of total advances was 0.29% as on March 31, 2012, which increased to 0.47% as on March 31, 2013. These figures are amongst the best in the industry. Also, Exim Bank has 80% provision coverage, which is also one of the best in the industry. Asset quality is a reflection of the problems faced by the industry due to a sharp slowdown in GDP growth and industrial production caused by a host of domestic and international factors, which are well known to all of us. Exim Bank’s clients are externally oriented. Prolonged recessionary trend in some of the advanced countries and unrest in the Middle East region, coupled with volatility in forex, had an adverse impact on some of the bank’s exporting customers. Added to this, the bank’s NPA problem has also been aggravated due to legal impediments and time consuming nature of asset disposal process.

TDB: Which were the main sectors to which Exim Bank disbursed loans in FY2014? Are you planning to tap some new sectors this fiscal?

YM: The top three sectors and their exposure as on March 31, 2014 were: Rs. 6,706.12 crore to ferrous metals and metal processing – an exposure of 10.94%; Rs. 5,673.69 crore to EPC services (project exports) – an exposure of 9.25%; and Rs. 4,640.09 crore to textiles and garments – an exposure of 7.57%. Overall, exposures of Exim Bank are fairly well diversified since it finances a wide variety of industries. Notwithstanding this, it has always been Exim Bank’s endeavour to finance emerging enterprises and sectors. Thus, for instance, we were on the vanguard of financing software companies during the 1980s when the Indian software industry was at its infancy. Similarly, we were among the first to finance the film industry when it was granted industry status. So, tapping new and emerging sectors is an ongoing process for us.

TDB: What is your strategy to address issues like high current account deficit, sustaining inflation and a weak rupee that have been tormenting the Indian economy?

YM: I don’t think that all these factors had a serious and significant bearing on Exim Bank. Rupee volatility has obviously been of concern, impacting both borrowing and lending operations of the bank. Exporters, at the same time, were not able to hedge to that extent during the 2013 volatility cycle, which was triggered by the Fed’s announcement to taper its stimulative quantitative easing policy. As far as the current account deficit is concerned, it has shrunk from 4.8% to 2.3% of GDP because of administrative measures to curb gold imports as well as robust export growth.

TDB: Exim Bank is planning to set up a project development company with the African Development Bank. Can you give us details of the plan?

YM: Exim Bank is almost at the final phase of setting up the Project Development Company (PDC) in Africa, in association with State Bank of India (SBI), IL&FS and African Development Bank. The new company will essentially look to bring infrastructure projects in Africa to a bankable stage and facilitate exports from India to Africa. This is the first time Exim Bank is looking to set up a PDC. The PDC will look at large projects that will be built across two-three countries in Africa.

TDB: Apart from Africa, which new locations and business lines do you find attractive?

YM: Exim Bank’s Africa focus is largely because there exists opportunities for growth and there are less number of institutions which are ready to participate in this opportunity. The bank is also in the process of designing a new business strategy over a 5-10 year horizon. Through our new strategy, we may consider looking into newer activities in sync with the government’s policies and vision, including diversifying export markets and destinations.

TDB: What are your targets for FY2015 and how do you plan to achieve them?

YM: Exim Bank plans to achieve a 15% growth in its loan business during FY2015. This would be facilitated through infusion of additional capital from the Government of India (a provision of Rs.1,300 crore has been made towards the bank’s recapitalisation in the Union Budget). This will enable the bank to enhance its headroom for borrowings and a suitable relaxation in the borrowing limit by RBI.

TDB: What according to you should be the 10-point agenda of the new government to provide the much-needed impetus to the Indian economy?

YM: The new government has been provided a historic opportunity and I am confident that it will live up to the people’s mandate. If I have to suggest a 10-point agenda, it will be as follows: 1) Taking immediate measures to boost the manufacturing sector in India; 2) Initiating steps to bring inflation under control to give monetary policy the room to support growth; 3) Resolving taxation issues and bringing clarity around tax laws; 4) Taking up implementation of the GST; 5) Giving much needed acceleration to all infrastructure projects; 6) Emphasising on green energy and bringing it under priority sector lending; 7) Focusing on regulatory reforms that will improve the ease of doing business, reduce transaction costs and expedite approval timelines; 8) Leveraging on Information Technology to make administrative governance in India transparent and stakeholders accountable; 9) India has not built a good city since independence. It is time that greater prospects are created in Tier-II and Tier-III cities so that the existing metros are not burdened; and 10) Initiating administrative reforms, particularly in police, judiciary, land acquisition and labour laws.