Investor Presentation Presentation Outline Key Credit Highlights 1 - PowerPoint PPT Presentation

India’s National Export Credit Agency Investor Presentation

Presentation Outline Key Credit Highlights 1 The India Story 2 The Exim Bank Story 3 Appendix 4 2

Section 2 Key Credit Highlights The India Story

Key Credit Highlights 1 India: Strong & Sustained Economic Growth Management 5 EXIM: 2 India’s Engine for Strength Proxy to Sovereign Growth of International Trade Policy Role at Financial Highlights National Level 4 3 4

Section 2 The India Story The India Story

India: Strong & Sustained Economic Growth Resilient GDP Growth (1,2,3) Nominal GDP (US$ bn)  World’s 7 th largest economy based on nominal GDP in 2016 (2) Nominal GDP for 2016: ~US$ 2.3 tn (2) o  World’s 3rd largest economy based on GDP measured in PPP terms in 2016 (2) GDP in PPP terms for 2016: ~US$ 8.7 tn (2) o  GDP growth rate for FY18 (Apr – Jun) estimated at 5.7% (3)  Favorable demographic profile: 66% of the population is between the age of 15 to 64 years (4)  Foreign Exchange Reserves rose to US$ 402.2 billion as on September 22, 2017 , covering over twelve months of import.  Implementation of currency exchange (demonetization) and GST to strengthen fundamentals of the economy through increased tax collection and greater financial inclusion. (5) 6 FYxx means financial year ended March 31, 20xx. E- estimated P - Projected Source: (1) Institute of International Finance (IIF); (2) IMF World Economic Outlook October 2017; (3) Ministry of Statistics and Programme Implementation (MOSPI); (4) World Bank Database; (5) India Development Update May 2017, World Bank

Indian Economy: Key Economic Indicators General Government Debt (% of GDP) (1) Current Account Deficit (2) Currency Movement (4) Centre State 66.6 66.2 65.6 67.6 67.9 18.9 18.9 19.0 20.4 17.8 47.7 47.3 46.6 47.2 50.1 FY 13 FY 14 FY 15 FY 16 FY 17E FY 13 FY 14 FY 15 FY 16 F 17E CPI Inflation Rate (2)** Key Macroeconomic Metrices Key Parameters FY2013 FY2017 Change 10.1% 9.3% Gross National Saving (% of GDP) (3) 33.8 32.2* (160 bps) Gross Domestic Investment (% of GDP) (3) 38.6 33.2* (540 bps) 5.8% 4.9% 3.8% Capital Expenditure 3.3% 11.8 13.9 210 bps (% of Total Expenditure) (3) Revenue Deficit (% of GDP) (3) 3.7 2.1 (160 bps) FY13 FY14 FY15 FY16 FY17 FY 18 FDI Inflows (US$ billion) (2) 34.3 60.2 75.51% (Apr-Sep) GNPA (as % of Gross Advances) (2) 3.2 9.6 654 bps CPI Exchange Rate (INR/US$, avg.) (2) 54.1 67.1 24.03% 7 Source: (1) Institute of International Finance (IIF) Database. (2) Reserve Bank of India, Press Release and Online Database (accessed online on 19/07/2017) (3) Office of the Economic Adviser, Ministry of Commerce and Industry, Government of India. (4) Reuters (Rebased to 100) * Data pertains to FY16 (as per latest available data) ** Base year for CPI Inflation FY13-FY17 is 2012=100

India’s Twin Balance Sheet problem Over Leveraged Corporates Bad-Loan-Encumbered Banks  Investment-GDP Ratio soared by 11% points to 38% in four  More than 12% of GNPA Ratio as on March 31, 2017 in PSBs; years to FY 2007-08;  India relatively resilient vis-à-vis Banks in US & Europe after the  Expectations of sustained double digit growth by corporates; Global Financial Crisis due to ultimate ownership by GOI;  In three years to FY 2008-09, non-food bank credit doubled;  Greater focus on resolution than recapitalisation;  Surge in capital inflows, reaching 9% of GDP in FY 2007-08;  Suggestion for a central Public Sector Asset Rehabilitation Agency (PARA);  High Leverage for corporates accentuated by cost overruns;  Employed by East Asian Countries after the 1997 Asian  Tightening of monetary policy due to rise in inflation: Crisis;  Repo rates increased from 4.75% in April 2009 to 8.50%  Dual moral hazard issue. October 2011;  Bank Credit to GDP (%)  Depreciation added to the stress in FC debt servicing:  India - 51.6% (March 31, 2017)*  USD/INR depreciated from 52.97 in February 2013 to 68.36 in August 2013;  China – 143.5% (December 31, 2016)**  By 2013, 33% of Debt owed by corporates with ICR < 1; increased to above 40% by 2016 8 Source: Economic Survey 2016-17, Bloomberg Database * RBI * *PRC 2017 Article IV consultation, IMF

Sound External Sector Trend of Merchandise Trade (1) Trend of Services Trade (2) 491 450 448 (US$ bn) (US$ bn) 152 158 154 163 146 381 384 314 310 300 96 276 262 85 82 81 79 40 112 72 22 FY13 FY14 FY15 FY16 FY17 FY18(Apr-Jun) FY13 FY14 FY15 FY16 FY17 FY18(Apr-Jun) Expors Imports Expors Imports India’s Export Pattern (1) India’s Import Pattern (1) FY 2013 43 33 29 61 33 19 21 17 45 US$ 300 bn FY 2013 164 84 33 37 36 17 26 27 67 US$ 491 bn FY 2017 FY 2017 44 36 33 32 25 23 22 20 42 US$ 276 bn 87 54 42 34 33 23 22 22 69 US$ 384 bn Gems & Jewellery Textiles Chemicals Petroleum Products Gems & Jewellery Electronics Items Petroleum Products Agri & Allied Products Transport Equipments Chemicals Machinery Agri & Allied Products Base Metals Machinery Others Ores & Minerals Base Metals Others  Merchandise trade (exports + imports) as percentage of GDP stood at 30% in FY17 (1) . India’s share in global merchandise trade stood at 1.9% (2016) (3)  India emerged as the 20 th largest merchandise exporter in 2016; and accounted for 1.7% of global merchandise exports in the same year (3)  India is the 8 th largest exporter of services in 2016, accounting for 3.3% of global services exports (3) 9 Source: (1) MOCI/IIF (2) Balance of Payment Statistics, RBI (3) World Trade Organization (accessed on 26/10/2017)

External Debt vis-à-vis External Reserves (US$ bn) External Debt 409.4 446.2 474.7 485.0 471.9 485.8 External Reserves 292.0 304.2 341.6 360.2 370.0 386.5 External Debt External Reserves FY 13 FY 17 FY 13 FY 17 2% 1% 2% 5% 9% 6%4% 5% 13% 34% 14% 37% 17% 25% 24% 18% 94% 89% Commercial Borrowings Short Term Non Resident Multilateral Bilateral Trade Credit Foreign Currency Assets Gold SDRs / Reserve Tranche 10 (1) ‘Volatile capital flows’ is defined to include cumulative portfolio inflows and short -term debt (RBI). For FY17, Volatile Capital Flow data pertains to end- March’17 . (2) Volatile capital flows to Reserves ratio peaked at 97.4% in September 2013 (3) Source: RBI/Ministry of Finance, Government of India

Economic and Institutional Structural Reforms : Work in Progress  Liberalisation of FDI  Aadhaar backed Direct Benefit Transfer (DBT)  The Insolvency and Bankruptcy Code, 2016 (IBC)  The Banking Regulation (Amendment) Act, 2017  The Real Estate (Regulation and Development) Act, 2016 (RERA)  Improvements to the Monetary Policy Framework  Demonetisation  Goods and Service Tax (GST)  Bank Recapitalisation Bonds  India jumped up 30 notches into the top 100 rankings on the World Bank’s ‘ease of doing business’ index • On the taxation index, India has vaulted up 53 places. • After the full impact of GST, ranking is expected to improve further.  Moody's upgrades India's government bond rating to Baa2 from Baa3; changes outlook to stable from positive • Based on the reforms carried out by the present Government, India’s structural credit strength and global competitiveness have improved. 11

Section 2 The Exim Bank Story The India Story

EXIM Bank - India’s Export Credit Agency Genesis Set up under a Act of Parliament in 1982 by the Government of India (GoI) Objectives “for providing financial assistance to exporters and importers, and for functioning as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with a view to promoting the country’s international trade…” “… shall act on business principles with due regard to public interest” (Export-Import Bank of India Act, 1981) Vision “To develop commercially viable relationships with a target set of externally oriented companies by offering them a comprehensive range of products and services, aimed at enhancing their internationalisation efforts” 13

EXIM Bank - India’s Export Credit Agency Ongoing Government Support  An instrument of Government policy as India’s official export credit agency 100% owned  100% owned by Government of India (“GoI”) by GoI o Proxy to the India Sovereign in international debt markets o Cannot be liquidated without GoI approval  Board of Directors are appointed by GoI Proxy to India Directors Comprises top officials from key GoI ministries (Commerce & Industry, o Sovereign in Appointed by Finance and External Affairs) and RBI International GoI Debt Markets  Guarantees are provided by GoI for lines of credit extended by EXIM which are on behalf of and supported by the GoI  A track record of GoI capital infusions Guarantees Equity on GoI Capital Routed Lines Infusion of Credit 14

EXIM – Proxy to Sovereign (Cont’d) EXIM’s credit rating has been on par with India sovereign rating since its Rating is Baa2 (Stable) on par with sovereign establishment Government Capital Injection 13 13 (INR bn) Rating is BBB- (Stable) on par with sovereign 8 7 5 5 FY13 FY14 FY15 FY16 FY17 HY18 • Continued GoI support evidenced by capital infusion • Budget allocation of INR 5 bn for FY 18 from GoI towards capital, received in April 2017 15