Mumbai, Sept 25 (KNN)  As a relief to the exporters against currency fluctuation, the Reserve Bank of India (RBI) has advised banks to denominate foreign currency component of the export credit in foreign currency only.

Earlier, the entire export credit limits under the pre-shipment and post-shipment schemes were denominated in rupees.

But it was observed that the export credit limits are calculated in Indian Rupees and the limit was apportioned between Rupee and foreign currency components depending upon the borrowers’ requirement.

While the overall export credit limits are fixed in Indian Rupees, the foreign currency component of export credit fluctuates based on the prevailing exchange rates.

RBI has even received representation from an organization of exporters that on account of depreciation of Indian Rupee, the unavailed foreign currency component of export credit gets reduced; and the foreign currency component of export credit already availed gets revalued at a higher value in terms of Indian Rupees resulting in the exporter being asked to reduce their exposure by part payment or where the export credit limit is not fully disbursed, the available limit for the borrower reduces, depriving exporter of funds.

RBI has examined the issue and advised the banks that they may compute the overall export credit limits of the borrowers on an on-going basis say monthly, based on the prevalent position of current assets, current liabilities and exchange rates and re-allocate limit towards export credit in foreign currency, as per the bank’s own policy.

“This may result in increasing or decreasing the Indian Rupee equivalent of foreign currency component of export credit,” RBI said in a notification.

RBI even advised that banks may denominate foreign currency (FC) component of export credit in foreign currency only with a view to ensuring that the exporters are insulated from Rupee fluctuations.

 The FC component of export credit, sanctioned, disbursed and outstanding will be maintained and monitored in FC.

However, for translation of FC assets in the banks’ book, the on-going exchange / FEDAI rates may be used. (KNN/SD/PC)