FIEO suggests measures to boost export credit

Top Stories

»	Sensex, Nifty open 1 pc lower amid West Asia tensions, weak global cues
»	India clocks robust 7.7 pc GDP growth in 2025-26, Q4 growth at 7.8 pc
»	RBI keeps repo rate unchanged at 5.25 pc, maintains ‘Neutral’ stance
»	Crude oil prices fall over 1 pc as ceasefire hopes ease West Asia concerns
»	Forced labour import curbs: US proposes up to 12.5 pc tariff on 60 countries, including India

SME Times News Bureau | 04 Apr, 2012
Exporters' body Federation of Indian Export Organisations (FIEO) has suggested a slew of measures in order to increase availability of credit to the export sector, and the micro, small and medium enterprises (MSMEs) in the country.

FIEO President Rafeeque Ahmed in a pre-credit policy discussion with leading chambers Tuesday said that all banks may provide Lines of Credit to exporters over and above the existing credit limits.

"State Bank of India is offering Lines of Credit to suppliers abroad whereby the exporter can purchase the raw material at LIBOR + rates from the buyer and the payment is squared up with the bank once the shipment is made and remittance received by the exporter. This facility is provided within the existing credit limits of the exporter," he stated, adding that since this is a cost effective financing option, all banks may provide this facility.

"Secondly, given the requirement of dollar loans by the MSME export sector and limited availability of the same, FIEO Chief asked RBI to set up a corpus of funds commensurate with the requirements of MSME export sector," Ahmed viewed.

The FIEO chief also said factoring as financing option needs to be made more viable in the existing circumstances.

"When exporters approach factoring agencies to "factor" their export receivables, margins vary from factor to factor and may be as high as 20% depending on the risk perception of buyer / country. RBI may issue directives to banks / independent private factors and a cap be imposed on factoring services," he said.

For facilitating working out of Rupee Payment Mechanism for exports to Iran, Advance Payment should be encouraged, Ahmed said. "The Advance Payment ensures commitment of the buyer and provides required cushion and guarantee to Indian exporters. If importers in Iran are willing to provide advance payment, the same should be permitted by Banks in India," he pointed out.

In addition, the FIEO president asked to allow set–off of export receivables against import payables for Iran which is not applicable to ACU mechanism. "This would smoothen out payment problems," he said.

FIEO demanded that Cancellation and Rebooking of forward cover should be allowed in case of exports where shipments are delayed on the request of buyer or for genuine reasons and exchange losses are passed on to exporter whereas gains are withheld.

Since exporter book the cover against a contract with the buyer, exporters should be allowed rolling over of the cover at the initial rate at least up to 25% of export turnover, said Ahmed.