Exim Bank's Rs 15 bn bond issue gets Crisil's AAA rating

Mumbai, Mar 31 (UNI) Crisil, India's premier corporate ratings agency, has assigned a ''AAA'' rating to Exim Bank's Rs 15 billion bond issue.

In a press release issued here today, Crisil pointed to the Bank's strong capitalisation level and high resource-raising ability as its key strengths.

Crisil's high rating also derives its strength from the Government of India's complete ownership of Exim Bank, stated the release.

Exim Bank, which essays a critical role in the formulation and successful implementation of India's foreign trade policies, has received support from the Government of India in the past in the form of periodic infusions of equity and guarantee support.

''Exim Bank is among the few institutions to receive special dispensations from the Government for conversion of National Industrial Credit (long-term operations) loans extended by the RBI into 20-year sub-ordinated debt, which is also eligible for classification as Tier 1 capital,'' pointed out the release.

Exim Bank has a net worth of Rs 25 billion which Crisil describes as ''significant'' and a high Tier 1 capital adequacy ratio of 20.5 per cent of risk-weighted assets as on March 31, 2005.

The Bank has also demonstrated its ability to raise wholesale funds at very competitive interest rates in the domestic and international markets.

However, these strengths are tempered by the Bank's moderate profitability levels, cautioned the release, adding that its interest spreads in most of its product categories have been under pressure owing to competition from commercial banks.

The Bank registered a return on average assets of 1.51 per cent in FY 05 as against 1.65 per cent in FY 04 and 2.01 per cent in FY 03 and its asset quality is ''marked by exposure to medium credit-quality borrowers and moderate gross non-peforming assets (NPAs),'' pointed out the release.

However, its asset quality trends have improved since FY 04, aided by modest recoveries and the gross NPAs in Exim Bank's loan book declined to 4.5 per cent as at March 31 2005, from 8.9 per cent in FY 03.

On Exim Bank's future outlook, Crisil stated that it expects the Bank to continue to benefit from the support provided by the Government, given the Bank's policy-enabling role in promoting the country's international trade.

According to Crisil, Exim Bank's strong capitalisation levels and the Government's support will enable it to sustain its credit risk profile. It also expects the Company to continue to maintain a moderate earnings and asset quality position, going forward.

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