Amid credit woes, exporters urge RBI to cut interest rates

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SME Times News Bureau | 26 Jul, 2012
The Reserve Bank of India should cut bank lending rates in its policy review slated for July 31 in the background of bank credit growth falling to 16.5 percent year-on-year in the first quarter of this financial year against 19.9 per cent a year before, said exporters' body Federation of Indian Export Organisations (FIEO).

While credit off-take has shrunk, inflation as measured by the WPI came in at 7.25% for June as against RBI’s projections of 7.6% for the month despite higher food prices . . . given the lower inflation figures and IIP of around 2.4% y-o-y calls for a immediate rate cut in the policy review, said FIEO President M. Rafeeque Ahmed in a recent press statement.

"A status quo position maintained by the RBI as in the 18th June,2012 announcement or deferring a rate cut till October, 2012 could hit industry hard," he cautioned.

Given the scenario of global slowdown, If rates are not lowered by the RBI, the Centre should subsidize cost of export credit by 4- 5% to all sectors as against 2% presently to select sectors in the interest subvention window, Ahmed said.

The period of realization of export proceeds should be extended to 2 years as against present Master Circular on exports which allows realization period to be 1 year and that to till September 30, the FIEO chief added.