Reserve Bank panel calls for relaxing exporters' credit rules

A Reserve Bank of India panel on Monday proposed raising the ceiling for foreign currency credit from $20 million for exporters, among other policy incentives to boost a sector that has contracted significantly due to a fall in global demand.

The panel also said foreign currency borrowing by banks for lending to exporters should be exempted from banks' net demand and time liabilities (NDTL) calculations to eliminate costs related to cash reserve ratio and statutory liquidity ratio.

Indian exports for the full year fell to $300 billion, well below the $350 billion target as the economy likely registered its weakest growth in a decade. The trade gap has put pressure on the rupee, feeding inflation.

India's current account deficit widened to an all-time high of 6.7 percent of the gross domestic product in October-December, due to heavy oil and gold imports and muted exports.

The panel suggested widening the scope for interest subvention, or a lower rate of interest on rupee export credits, to a larger segment of exporters including electronics, engineering goods and particularly the automotive sector, rather than only employment-oriented sectors.

The report also called for framing an interest subvention policy for long-term export credit. The panel also suggested scrapping withholding tax on funds raised overseas.


Copyright Thomson Reuters 2013