SME Times News Bureau | 04 Jun, 2014
Commenting on the Bi-monthly Monitory Policy statement of
the Reserve Bank of India issued Tuesday, M Rafeeque Ahmed, President,
Federation of Indian Export Organisations (FIEO) said that reduction in the
Export Credit Re-Finance (ECR) from 50 percent to 32 percent will affect both
the availability and cost of credit which will be detrimental to
competitiveness of Indian exports at a time when Global economy is gathering
momentum with Global trade forecasted to grow by 4.7 percent in 2014.
Elaborating further Rafeeque said that banks would be reluctant to lend to the
export sector, with the reduction in ECR, which is already facing liquidity
crunch, as share of exports credit in net bank credit has come down drastically
from close to 9 percent to 3.5 percent in last ten years.
The cost of credit is also likely to go up between 0.5 to 1 percent and it is
not clear to what extent the special term Repo facility to 0.25 percent of net
demand and time liquidity of the bank will offset this loss said Mr Ahmed. FIEO
Chief said that FIEO is pushing to bring exports under priority sector lending
and this move has definitely upset us.
The Reserve Bank of India (RBI), on Tuesday, reduced the availability of funds
under the export credit refinance (ECR) window from 50 percent of export credit
outstanding to 32 percent with immediate effect, reports media.
To compensate for the reduction in liquidity under the scheme, the central bank
introduced a special term repo facility of 0.25 percent of net demand and time
liabilities (NDTL), it added.
The ECR changes should improve access to liquidity from the RBI for the system
as a whole without the procedural formalities related to documentary evidence,
authorisation and verification associated with the ECR, the central bank said.