New Delhi, Apr 8 (KNN) Chanda Kochhar, CEO and Managing Director, ICICI Bank proposed categorisation of pre-shipment export credits, under the Priority Sector Lending.  She was presenting her suggestions on reversing the current downward trend in exports from India, before the Board of Trade, the highest trade policy making body of India.

A meeting of the Board of Trade held  with Commerce and Industry Minister, Nirmala Sitharaman at Chair, was held in Delhi on 6^th April, 2016, to consider  ways and means for upscaling exports from India, which is decreasing continuously for the last one and half year.

Reserve Bank of India classify lending by Banks to agricultural sector, MSMEs and some other specified loans as ‘Priority Sector Lending’ and Banks must sanction a certain percentage of total loans sanctioned in a year to this category. Also the interest charged on this sector has to be the lowest.

Availability of assured credits at cheaper rates, under priority sector lending window will surely be a significant support to Indian exporters, particularly from the MSME sector, who is presently reeling under severe demand recession in the global market, undercutting of rates by some countries and high domestic costs of raw materials.

Kochhar has also suggested that forex deposits of the foreign branches of Indian banks be allowed to be released to Indian Companies as export linked loans. As interest rates for Bank deposits in developed countries are near to zero, the fund may be made available at very low interest rates to Indian exporters enhancing their competitiveness in the global market. This will also provide cheaper finance to small exporters who cannot access External Commercial Borrowings (ECBs).

Another out of Box suggestion of the ICICI Bank M D at the Board of Trade meeting was to consider pre – shipment credits within statutory Liquidity Ratios (SLR) and Cash Reserve Ratios (CRR). Under RBI policy directives, Banks are required to park certain percentage of their total deposits with specified Government Bonds etc. and if export credits are considered eligible for CRR and SLR, Banks will be happy to release the loan immediately as in any case they have to park the amount immediately as per RBI guidelines.

While Sitharaman, the Commerce and Industry Minister, immediately reacted on taking up the issue of export credit under priority sector lending, certain camps within the MSME sector have raised the red flag. According to one expert, MSME loans are already under priority sector lending and inclusion of export credit will not bring further relief if the size of the portfolio or percentage of priority sector lending within total Bank credit is not increased.  In fact, he strongly opposed opening of priority sector lending to non – MSME borrowers in the garb of export credit. (KNN/DB)