Ratings agency Standard & Poor's (S&P) has assigned the lowest investment grade rating to Exim Bank's proposed $200 million debt, in line with the ratings given to the Indian government's finances.
The $200 million five-year senior unsecured fixed-rate notes are part of the bank's $1 billion medium-term note programme, which had also got the same rating from S&P.
BBB- is the lowest rating within investment grade, below which speculative or junk grade starts. Investment in debt programmes given junk rating is supposed to be riskier than in the investment grade.
The rating given to the proposed debt of Exim Bank is the same as was given to India, since there is an extremely high likelihood of extraordinary government support, said the agency.
"Conversely, we view the principal source of risk for the bank to be the sovereign risk--particularly the weak fiscal profile of the government of India," it said.
Indian government's fiscal deficit had deteriorated sharply after it provided a series of stimulus packages to the slowing down economy, hit by the deepening global financial crisis. However, the deficit is projected to come down to 5.5 per cent of GDP this fiscal from 6.7 per cent last year, after the government partially rolled back the stimulus.
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The rating also reflects the bank's stand-alone credit features of strong capitalisation and a modest but consistent record of profitability.
These strengths are partly offset by the bank's high asset concentration.
Fully owned by the government, the EXIM operates mostly in export credit and finance to support the globalisation efforts of Indian companies.