Exporters Seeks Forex Loans At Cheaper Rates.

Ahead of RBI money policy on Friday, exporters have sought lowering cost and greater availability of foreign currency loans to help merchandise exports.

The issue has becoming increasingly important for exporting community as Indian exports across sectors have slowed down on back of dip in demand in traditional markets like EU and US.

“RBI may reducing interest rates for micro, small and medium enterprises (MSME) to 7 per cent and bring the sector under priority window, besides arranging for low cost foreign currency loan to enable exports from the sector,” Ramu Deora, president of the Federation of Indian Exports Organisation said.

Dollar loans are hardly available to MSMEs in India owing to absence of guarantees while it is easily available at 2.5-3 per cent in competing countries. This has hit the competing edge of Indian exporters over the last one year after nearly 400 basis points hike in interest rates by central bank.

Currently, credit costs to Indian exporters have gone up to 11 per cent from 7 per cent a year ago. This is again far more than cost of borrowing in competing countries like China (6.5 per cent), Thailand (8.4 per cent), Indonesia (6.3 per cent), Mexico (5.1 per cent) and South Korea (1.25 per cent).

According to FIEO, policy-easing stance is required from RBI because of overall slowdown in economy as is being exhibited by a slump in credit off-take to 17.6 per cent so far vis-à-vis 22.7 per cent in the corresponding period last year and a decline in industrial output to a dismal low of – 5.1 per cent in October 2011.

“Exports are increasingly becoming uncompetitive with higher cost of borrowings in India. It is time RBI should ideally provide credit at Libor rates so that Indian products can compete with other countries in overseas markets,” Aman Chadha, chairman of Engineering Export Promotion Council said.

Source : mydigitalfc.com