RBI's interest hike to impact 2.61 mn exporting MSMEs
Updated: Jan 28, 2014 04:46:26pm
New Delhi, Jan 28 (KNN) Raising concern over the interest hike by the Reserve Bank, exporter’s body FIEO said that RBI’s repo rate hike by 25 bps in the third-quarter review of the monetary policy may severely impact 2.61 million registered exporting MSME’s and many more in the unorganized sector.
Commenting on RBI’s repo rate hike by 25 bps in the third-quarter review of the monetary policy to 8 per cent President, Federation of Indian Export Organisations ( FIEO) M Rafeeque Ahmed said that a month after touching a record high, CPI inflation came down to a three-month low of 9.87 per cent in December compared with 11.16 per cent a month ago and Wholesale Price Index (WPI) inflation was at five-month low in December at 6.16 per cent compared with 7.52 per cent the previous month and a status quo had been anticipated by industry.
FIEO chief elaborated that in spite of RBI’s listed pre-requisites being met, WPI and CPI headline inflation rates were substantially down 1.29 and 1.36 percentage points, respectively; core retail inflation is unchanged; while core WPI inflation, although 20 bps higher, remains under the 3 per cent target, this would be a disappointment for given the data released last week on industrial production and trade.
FIEO chief expressed concern that exports maybe further impacted particularly MSME export sector which according to the 12th plan document are 1 per cent of the 261 million registered units in the country who have limited finances and look up to RBI/banking channel for succour.
In such a scenario, where most macro-economic fundamentals are showing a downtrend RBI may consider the following suggestions to support the sector:
1. Gold card scheme started by select bankers for select exports based on export performance and track record is yet to be rolled out. The scheme be reviewed for greater facilitation to the exporters and may be re-started again.
2. The RBI notification on third country /third party remittances issued on 8th November, 2013 has compounded the problem of the trade as it has ignored the normal business practices and AD’s are asking for lot compliances. Instead of simplifying it is more complicating as the compliances required by the RBI are not easy to meet up with. Many a time there is a change in the consignee at the port of discharge, when original consignee refuses to accept shipment and asks for a discount necessitating exporter to look for alternative buyer. In such a case change in name of final consignee/ remitter in the invoice may suffice and be included in the extant guidelines.
3. The period of realization and repatriation to India has been brought to 9 months from the date of export, till September 30, 2013. RBI may please specify the status of this matter w.e.f. October 1, 2013 by issuing a circular to remove the confusion prevailing on this issue.
4. Certain banks refuse to acceptance remittance from OFAC Sanctioned Countries while certain banks after acceptance of remittance and in spite of fulfilment of the export obligation by the exporter refuses to issue BRC. We request RBI to consider the fact that in the present competitive scenario. (KNN/SD)
Commenting on RBI’s repo rate hike by 25 bps in the third-quarter review of the monetary policy to 8 per cent President, Federation of Indian Export Organisations ( FIEO) M Rafeeque Ahmed said that a month after touching a record high, CPI inflation came down to a three-month low of 9.87 per cent in December compared with 11.16 per cent a month ago and Wholesale Price Index (WPI) inflation was at five-month low in December at 6.16 per cent compared with 7.52 per cent the previous month and a status quo had been anticipated by industry.
FIEO chief elaborated that in spite of RBI’s listed pre-requisites being met, WPI and CPI headline inflation rates were substantially down 1.29 and 1.36 percentage points, respectively; core retail inflation is unchanged; while core WPI inflation, although 20 bps higher, remains under the 3 per cent target, this would be a disappointment for given the data released last week on industrial production and trade.
FIEO chief expressed concern that exports maybe further impacted particularly MSME export sector which according to the 12th plan document are 1 per cent of the 261 million registered units in the country who have limited finances and look up to RBI/banking channel for succour.
In such a scenario, where most macro-economic fundamentals are showing a downtrend RBI may consider the following suggestions to support the sector:
1. Gold card scheme started by select bankers for select exports based on export performance and track record is yet to be rolled out. The scheme be reviewed for greater facilitation to the exporters and may be re-started again.
2. The RBI notification on third country /third party remittances issued on 8th November, 2013 has compounded the problem of the trade as it has ignored the normal business practices and AD’s are asking for lot compliances. Instead of simplifying it is more complicating as the compliances required by the RBI are not easy to meet up with. Many a time there is a change in the consignee at the port of discharge, when original consignee refuses to accept shipment and asks for a discount necessitating exporter to look for alternative buyer. In such a case change in name of final consignee/ remitter in the invoice may suffice and be included in the extant guidelines.
3. The period of realization and repatriation to India has been brought to 9 months from the date of export, till September 30, 2013. RBI may please specify the status of this matter w.e.f. October 1, 2013 by issuing a circular to remove the confusion prevailing on this issue.
4. Certain banks refuse to acceptance remittance from OFAC Sanctioned Countries while certain banks after acceptance of remittance and in spite of fulfilment of the export obligation by the exporter refuses to issue BRC. We request RBI to consider the fact that in the present competitive scenario. (KNN/SD)
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