New export refinance norms a non-event for exporters: EEPC
Updated: Jun 03, 2014 12:44:12pm
New Delhi, Jun 3 (KNN) The Engineering Export Promotion Council (EEPC) has come out with a statement highlighting the fact that the new export refinance norms are a non-event for exporters as banks shy away from the facility.
“As banks are flush with the liquidity in any case, they are not resorting to refinance from the RBI for export credit. Thus, the change in the export refinance system from sector-specific to generalised special repo facility equivalent to 0.25 per cent to net liabilities would not make a significant difference to the exporting sector in so far as the cost of borrowing is concerned,” said EEPC India chief, Anupam Shah.
He said that export credit rates are still high and there is not much of difference between the domestic and export interest rates. Given the difficult and very competitive global market where exporters have to compete with razor thin margins, interest rates in India are still very high.
“We were expecting that the export credit should be given at the bank rates, but banks are charging 11 per cent which is well above the base rates of several banks,” he said.
The Credit policy review document has said that 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 Reserve Bank has decided to limit access to export credit refinance while compensating fully with a commensurate expansion of the market’s access to liquidity through a special term repo facility from the Reserve Bank (equivalent to 0.25 per cent of NDTL).
The RBI said this should improve access to liquidity from the Reserve Bank for the system as a whole without the procedural formalities relating to documentary evidence, authorisation and verification associated with the ECR. This should also improve the transmission of policy impulses across the interest rate spectrum and engender efficiency in cash/treasury management.
However, the new dispensation wouldn’t make much of difference as banks are not keen on getting refinance facility for exports, Shah added. (KNN/ES)
“As banks are flush with the liquidity in any case, they are not resorting to refinance from the RBI for export credit. Thus, the change in the export refinance system from sector-specific to generalised special repo facility equivalent to 0.25 per cent to net liabilities would not make a significant difference to the exporting sector in so far as the cost of borrowing is concerned,” said EEPC India chief, Anupam Shah.
He said that export credit rates are still high and there is not much of difference between the domestic and export interest rates. Given the difficult and very competitive global market where exporters have to compete with razor thin margins, interest rates in India are still very high.
“We were expecting that the export credit should be given at the bank rates, but banks are charging 11 per cent which is well above the base rates of several banks,” he said.
The Credit policy review document has said that 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 Reserve Bank has decided to limit access to export credit refinance while compensating fully with a commensurate expansion of the market’s access to liquidity through a special term repo facility from the Reserve Bank (equivalent to 0.25 per cent of NDTL).
The RBI said this should improve access to liquidity from the Reserve Bank for the system as a whole without the procedural formalities relating to documentary evidence, authorisation and verification associated with the ECR. This should also improve the transmission of policy impulses across the interest rate spectrum and engender efficiency in cash/treasury management.
However, the new dispensation wouldn’t make much of difference as banks are not keen on getting refinance facility for exports, Shah added. (KNN/ES)
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