Mumbai: Fearing a cut in financial support from banks as a
result of a global slowdown, exporters, especially from small and
medium enterprises (SMEs) across industries, will meet bankers on
Wednesday for continued assistance.
“This meeting will
look at all the segments of exports. We will like to understand their
conditions and issues,” said T S Narayanasami, chairman and managing
director, Bank of India, and chairman of the Indian Banks’ Association
(IBA).
While large companies have received attention, so far
banks have not looked at small units. “They should not be left out as
they are crucial for employment and business activity,” he added.
Bankers
said many export units are under a stressed liquidity position due to
substantial debt and low-cash accruals, leading to delays in repayment
to banks and overdrawn limits. Liquidity has been further stretched by
the slowdown in export sales of companies, adversely affecting their
cash flow.
The export units, which make products having higher
import content, are exposed to risks relating to volatility in raw
material prices and foreign exchange fluctuations, they added.
Vasant
Mehta, the chairman of Gems and Jewellery Export Promotion Council,
said every industry is going to look for a reduction in the cost of
funds. Banks should not curtail finance and credit limits when units
are passing through tough times, he added.
Though jewellery
units are facing a contraction in demand, it will not necessarily lead
to a sharp rise in defaults, causing worries over mounting bad assets,
Mehta added.
The engineering industry is also reeling under the
effect of the slowdown. There have been instances where banks have not
honoured documents and reduced the limits when they came up for
renewal. “We understand the stance of banks that they should be
cautious in present times.
But they need not be over-cautious”
said Rajesh Shah, the chairman of the special task-force on global
crisis formed by the Engineering Export Promotion Council.
Source : Business Standard