Mumbai, Oct 1 (KNN) Reserve Bank of India (RBI) has cut the export credit refinance (ECR) facility from 32 per cent of banks' eligible export credit to 15 per cent, with effect from October 10, a move which will affect the MSME sector the most.

This is the second time it has done so this financial year; it had reduced it from 50 per cent in the June review.

“…it has been decided to reduce the eligible limit of ECR facility from the level of 32 per cent of the outstanding rupee export credit eligible for refinance as at the end of the second preceding fortnight to 15 per cent effective from October 10, 2014,” RBI said in a notification.

Retaining export refinance at existing levels and re-introducing interest subvention immediately required sustaining and consolidating export markets as concerns of a QE taper looms large on export sector, president of the Federation of Indian Export Organisations (FIEO), Rafeeque Ahmed said.

He further told media, “A second-time reduction in the current year does not augur well for exports and might affect both the flow and cost of credit to the sector, affecting micro and small companies the most."

Exports grew at a five-month low of 2.35 per cent in August, to USD 26.95 billion. (KNN/SD)