AEPC Seeks Separate Policy For MSME Exporters From RBI

New Delhi, Feb 17 (KNN) Apparel Export Promotion Council (AEPC) has called for a dedicated export policy for the MSME sector.

In a meeting with Reserve Bank of India (RBI) Governor Sanjay Malhotra in Mumbai on February 16, AEPC Chairman A. Sakthivel proposed the introduction of a Special Interest Package Scheme for MSMEs.

He stated that lending rates are currently determined by individual banks based on internal policies and balance sheet positions, resulting in uneven and often higher borrowing costs for small exporters.

Concerns Over Export Finance and Lending Practices

Sakthivel indicated that as India has signed free trade agreements with 37 countries, creating fresh opportunities for the apparel and textiles sector over the coming decade, the sector's credit needs would grow significantly going forward. 

He noted, “A large number of apparel exporters across India — predominantly MSMEs — face several operational and regulatory difficulties, particularly in their interactions with Authorised Dealer (AD) Banks, export finance systems, and compliance frameworks.” 

He highlighted concerns such as high interest rates on MSME loans, heavy reliance on CIBIL scores that disadvantage small and first-time exporters, high Turnaround Time (TAT) in loan approvals affecting working capital, and limited digitalisation in lending systems leading to delays and lack of transparency.

Currently, banks determine lending rates based on their internal policies and balance sheet considerations, leading to inconsistencies and higher borrowing costs. 

In this regard, Sakthivel said, “The RBI may kindly consider issuing appropriate regulatory guidelines to ensure fair, transparent and uniform lending practices for MSMEs, thereby improving credit accessibility and supporting sustainable sectoral growth through end-to-end digital loan processing and real-time tracking.”

Demand for Higher Interest Support

He also sought an increase in the Interest Equalisation Scheme for manufacturing exporters from 2.75 per cent to 5 per cent and requested removal of the Rs 50 lakh cap, suggesting a graded enhancement based on turnover and export performance.

Among other recommendations were limiting mandatory external credit ratings to MSMEs with banking exposure above Rs 100 crore, replacing Credit Information Reports (CIRs) with Central Repository of Information on Large Credits (CRILC) reports where applicable, reducing or waiving processing charges on renewal of existing bank limits without enhancement, and standardising forex conversion and bank service charges under RBI oversight.

Sakthivel further flagged higher financing costs due to separate risk coverage premiums taken by banks for pre-shipment credit despite exporters already holding buyer risk policies from the Export Credit Guarantee Corporation of India. 

He also called for integration of foreign bank charge data between the RBI’s EDPMS system and Customs ICEGATE to prevent short realisation notices.

(KNN Bureau)