Govt plans group for cost-effective credit to exporters

In a bid to push up sagging exports, government will set up a group that will streamline procedures to make available cost-effective credit to exporters. The group will also formulate credit-related policies that will aid exporters to remain competitive in global trade even in the long term.

The group will have officials of finance ministry, RBI, exim bank, export credit guarantee corporation (ECGC) and public sector banks apart from exporters from federation of Indian exports organisation (Fieo). First meeting of the group will be held next month.

“A group comprising all lenders like banks, RBI, ECGC, exim bank and government officials should be formed to sort out procedural challenges that are being faced by exporters in availing credit,” DK Mittal, secretary, banking and financial services said. He was interacting with exporters from Fieo on Thursday.

The group is being set up in the wake of declining share of export credit as a percentage of net bank lending and also as a percentage of exports. Export credit as a percentage of net bank credit has come down from 9.8 per cent in March 2000 to 4.2 per cent as on December 30, 2011 while the compound annual growth in export credit in the last decade has been 13.45 per cent as compared to a CAGR of 19.11 per cent in exports.

As per Fieo, declining export credit is one of the biggest handicaps for tiny and small units who are not given timely credit to meet their export requirements.

“Moreover, banks are insisting on collateral even for small value loans and in some cases this is over 200 per cent of exposure, thereby restricting the operational viability of exporters,” Fieo president Rafeeque Ahmed said on Thursday.

Merchandise exports declined by 5.45 per cent in June at $25.07 billion as compared to $26.51 billion in June last year after 4.16 per cent decline in May and a mere 3.2 per cent growth in April. This has resulted in 1.7 per cent dip in exports in the first quarter (April- June) at $75.2 billion vis-à-vis $76.5 billion in the corresponding quarter of the last financial year.

Source : wrd.mydigitalfc.com