Mumbai, Jun 4 (KNN) The Reserve Bank has reduced the availability of funds under the export credit refinance (ECR) window from 50 per cent of export credit outstanding to 32 per cent with immediate effect.  Further, it will introduce a special term repo facility to compensate for the reduction.
 
“…it has been decided to reduce the eligible limit of ECR facility from the level of 50 per cent of the outstanding rupee export credit eligible for refinance as at the end of the second preceding fortnight to 32 per cent with immediate effect,” the apex bank said in a notification yesterday.
 
The RBI said that this was “in pursuance of the Dr Urjit R Patel Committee’s recommendation to move away from sector-specific refinance towards a more generalised provision of system liquidity without preferential access to any particular sector or entity.”

The Urjit Patel committee had called for moving away from sector-specific refinance towards a more generalised provision of system liquidity without preferential access to any particular sector or entity.

The RBI said the limit on accessing funds under the ECR facility will also improve the transmission of policy impulses across the interest rate spectrum and engender efficiency in cash or treasury management.

Exporters’ body, Federation of Indian Export Organisations (FIEO) said that reduction in the ECR from 50 per cent to 32 per cent will affect both the availability and cost of credit which will be detrimental to competitiveness of Indian exports at a time when Global economy is gathering momentum with Global trade forecasted to grow by 4.7 per cent in 2014.
FIEO further said that banks would be reluctant to lend to the export sector, with the reduction in ECR, which is already facing liquidity crunch, as share of exports credit in net bank credit has come down drastically from close to 9 per cent to3.5 per cent in last ten years. (KNN/SD)