Rationale

The ratings continue to derive strength from Export-Import Bank of India’s (EXIM) sovereign ownership, its strategic importance to the Government of India (GoI) as a key policy institution for promoting the trade competitiveness of Indian entities in international markets, the GoI’s support in the form of periodic capital infusions (Rs. 9,050 crore infused during FY2018-2022) and the bank’s superior liquidity profile. The ratings derive further comfort from EXIM’s relatively risk-free book under lines of credit (LoC) and, the Concessional Financing Scheme (CFS), which is categorised as policy lending programmes, which accounted for 44% of its net advances as on March 31, 2024. Further, the sovereign exposure under the National Export Insurance Account (NEIA) accounted for 4% of its net advances. ICRA notes that the bank’s quasi-sovereign status supports its ability to raise both onshore and offshore funding at competitive rates. As growth picked up in the commercial business, the leverage1 increased to 7.47 times on March 31, 2024 (6.90 times on March 31, 2023) and is expected to continue rising in the near to medium term. Nonetheless, it remains well below the regulatory threshold of 10 times the net owned funds (NoF). With the implementation of the Basel III framework from April 1, 2024, the borrowing limit of 10 times is replaced by a Leverage Ratio of 4% (minimum). The capitalisation metrics remain comfortable, supported by the low risk-weighted assets (RWA) in the policy and refinance businesses. EXIM reported minimal slippages in FY2024 and the fresh non-performing assets (NPA) generation rate in recent years, aiding to improve the headline asset quality indicators. Further, the bank’s watchlist moderated to Rs. 3,620 crore (2.26% of gross advances) as on March 31, 2024 from Rs. 4,690 crore (3.37% of gross advances) as on March 31, 2023. Given the high share of policy business, the return on assets (RoA) remained modest, although it has been improving steadily. The Stable outlook on the ratings indicates ICRA’s expectation that EXIM will keep benefitting from its sovereign ownership, regular capital infusions by the GoI as demonstrated in the past, and its strategic importance to the GoI as a key policy institution for promoting the trade competitiveness of Indian entities in international markets.