EXIM in tandem with the Sovereign: Fitch

The Dollar Business Bureau

Fitch Ratings, an international credit rating agency, declared the position of the EXIM bank of India at ‘BBB-’, which indicates that the working of the bank is stable.

The rating was based on the policies of financing, easing and promoting Indian foreign trade. The factors influencing EXIM ratings, such as IDRS, Support Rating and Support Rating Floor are balanced with that of India’s Sovereign BBB-/ resulting in a stable outlook.

The Export-Import Bank of India Act 1981, directs that the government to own 100% of the EXIM bank directly. The EXIM Bank is controlled by the Ministry of External Affairs, Ministry of Commerce and Industry and Ministry of Finance.

According to the act, EXIM bank, which is also an agent of the government can extend credit loans to other developing nations. These loans can be dissolved only after the government’s approval. The government guarantees interest and principal on the loans, and offers interest subsidies to EXIM on the loans that are extended on its directions.

With the RBI’s offer to back liquidity and periodic capital injections to EXIM in the past, EXIM’s link with Sovereign has strengthened.

Fitch, which is a top notch financial information service provider, did not allot EXIM with a Viability Rating due to its policy role-oriented approach.

Moreover, any weakness in the link between EXIM and the Sovereign, such as a deviation of EXIM from its business model, policies or reduced direct ownership of government, could lead to a revision in the ratings of Fitch, which is majorly owned by Hearst.

However, Fitch stated that a change in EXIM’s relation with Sovereign could be unlikely in the near future.