'RBI unlikely to bring exports under priority sector lending'

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SME Times News Bureau | 08 Nov, 2013
The Reserve Bank of India (RBI) has decided not to include export credit in the priority sector list, reports a leading web news portal.

According to the report, RBI has communicated its views to the commerce ministry, saying that if export credit is included in the priority sector list, then it could crowd out loans under this window to sectors like agriculture and micro, small and medium enterprises (MSMEs). Hence, RBI is not in favor of including export credit in the priority sector list, sources told CNBC-TV18.

With a view to increase liquidity to export sector, the apex exporters body Federation of Indian Export Organisations (FIEO) has repeatedly said that there is a strong need to bring exports under priority sector lending and put a separate cap on exports.

"Bring back exports under priority sector lending and put a separate cap on exports, within 40 percent norms, so that the apprehension that other priority sectors will lose attention is equally addressed," FIEO chief, M. Rafeeque Ahmed said last week.

The apex exporters body in its releases, added that pressure on currency could be lessened only through exports on sustainable basis and demanded that recommendation of the Padmanabhan Committee be implemented in a time bound manner.

Ahmed agreed with RBI that outlook of global growth has improved with fiscal concerns abating in the US and key economic indicators improving in the Euro area. He exuded confident to post better exports result in the second half of the current fiscal.

However, Finance Minister P Chidambaram, last month, has also said that the government was talking to RBI to see if export credit could be treated as priority sector lending, a measure that can increase the flow of funds to the sector. But it seems that RBI is looking at the broader picture before taking its decision to bring exports under priority sector lending.