MSME exporters require lower cost of credit to sustain: FIEO

Top Stories

»	49% Indian startups now from tier 2, 3 cities: Jitendra Singh
»	'India ranks 3rd in global startup ecosystem & number of unicorns'
»	Tripura exported over 9K tonnes of pineapples in 2 years
»	CPI inflation eases to 6.71% in July, IIP falls to 12.3%
»	Rupee depreciates 12 paise to close at 79.64 against US dollar

SME Times News Bureau | 19 Jun, 2015
Apex exporters body, Federation of Indian Export Organisations (FIEO) has said that the high cost of credit has impacted adversely on exporters in Micro, Small and medium Enterprise (MSME) sector.

S C Ralhan, President, FIEO while commenting on the latest release of RBI on deployment of gross bank credit as of April this year stated that the high cost of credit has impacted adversely the credit off-take which has declined to 8.9 percent for industry (from 14.2 percent in the corresponding period last year) and alarmingly low to 10 percent for MSMEs (from 21 percent); besides export credit which also reflected a declining trend.

FIEO chief Thursday stated that in an effort to reduce interest costs and make exports more competitive pending re-introduction of interest subvention, exporters are getting bills discounted from a foreign bank which have a tie-up with the importer's bank where the rate of interest is less than two percent per annum.

However, this facility is available to only large export houses, based on their counterpart importer's credit record with their respective foreign lender, which leaves out a large number of exporters who have to deal with a higher cost of credit in the face of diminishing export orders due to a demand contraction. What makes things worse is the lack of competitiveness which edges out the MSME exporter from the global market place.

While export credit has been put albeit with a cap in the priority sector it has come at a time where there is a demand contraction while interest rates continue to be high for the export sector in the absence of interest subvention which has been anticipated to be re-introduced and in the pipeline for long.

FIEO chief stated that given the decline in credit off-take re-working credit costs by reducing base rates, cutting down the spread or margins over the base rate, and repackaging credit products to offer better value both to exporters and industry maybe a pre-requisite.