Steep decline of Credit off-take to MSMEs may require re-working credit costs, cost effective credit options: FIEO
Updated: Jun 18, 2015 02:27:50pm
New Delhi, June 18 (KNN) The high cost of credit has impacted adversely the credit off-take which has declined to 8.9 per cent for industry and alarmingly low to 10 per cent for MSMEs; besides export credit which also reflected a declining trend, exporters’ body FIEO has said.
Federation of Indian Export Organisation (FIEO) President, S C Ralhan, said this while commenting on the latest release of RBI on deployment of gross bank credit as of April this year.
FIEO chief stated that in an effort to reduce interest costs and make exports more competitive pending re-introduction of interest subvention, exporters are getting bills discounted from a foreign bank which have a tie-up with the importer’s bank where the rate of interest is less than two per cent per annum.
However, this facility is available to only large export houses, based on their counterpart importer’s credit record with their respective foreign lender, which leaves out a large number of exporters who have to deal with a higher cost of credit in the face of diminishing export orders due to a demand contraction.
What makes things worse is the lack of competitiveness which edges out the MSME exporter from the global market place, FIEO noted.
While export credit has been put albeit with a cap in the priority sector it has come at a time where there is a demand contraction while interest rates continue to be high for the export sector in the absence of interest subvention which has been anticipated to be re-introduced and in the pipeline for long.
FIEO chief stated that given the decline in credit off-take re-working credit costs by reducing base rates, cutting down the spread or margins over the base rate, and repackaging credit products to offer better value both to exporters and industry maybe a pre-requisite. (KNN Bureau)
Federation of Indian Export Organisation (FIEO) President, S C Ralhan, said this while commenting on the latest release of RBI on deployment of gross bank credit as of April this year.
FIEO chief stated that in an effort to reduce interest costs and make exports more competitive pending re-introduction of interest subvention, exporters are getting bills discounted from a foreign bank which have a tie-up with the importer’s bank where the rate of interest is less than two per cent per annum.
However, this facility is available to only large export houses, based on their counterpart importer’s credit record with their respective foreign lender, which leaves out a large number of exporters who have to deal with a higher cost of credit in the face of diminishing export orders due to a demand contraction.
What makes things worse is the lack of competitiveness which edges out the MSME exporter from the global market place, FIEO noted.
While export credit has been put albeit with a cap in the priority sector it has come at a time where there is a demand contraction while interest rates continue to be high for the export sector in the absence of interest subvention which has been anticipated to be re-introduced and in the pipeline for long.
FIEO chief stated that given the decline in credit off-take re-working credit costs by reducing base rates, cutting down the spread or margins over the base rate, and repackaging credit products to offer better value both to exporters and industry maybe a pre-requisite. (KNN Bureau)
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