FIEO Urges RBI to Open LIBOR-Linked Forex Loan Facility For Exporters .

MUMBAI: Federation of Indian Export Organisations (Fieo) has called on the Reserve Bank to open a Libor-linked forex loan facility for exporters, especially the small and medium ones, to help them overcome the fund crunch.

Quoting the latest RBI data, Fieo President Ramu S Deora said the rising interest rates have impacted credit offtake by 2 percentage points, which has shrunk to 18.5 percent.

Deora also pointed out that in spite of the repeated hikes in policy rates by RBI, inflation is again gravitating towards double-digit levels.

RBI has hiked short-term lending rates by a whopping 475 basis points since March 2010 to tame inflation, which has been hovering over 9 percent since last December.

Deora pointed out that with the global environment being subdued by the sovereign debt downgrades of the US and Japan and the worsening debt crises in the Eurozone area, there is little to look forward to as far as exports from the MSME sector are concerned.

Deora also warned that going forward export growth will slow down while imports are likely to be the same, further widening the already high trade deficit.

In the circumstances, Deora urged the government to cap interest rates for MSME exports at 7 percent with introduction of interest subvention for exports, monitoring of credit offtake for exports and providing information of the same in the monetary policy review regularly.

He also called for apportioning of more funds to the Export Credit Guarantee Corporation for covering the troubled markets besides increasing the interest-bearing Exchange Earner's Foreign Currency Accounts to offset the rising interest costs/inputs and raw materials costs.

It is understood that the ongoing dollar supply crunch in Europe is pushing up the cost of obtaining the American greenback through the swap market in Asian financial centres, impacting MSMEs that are looking for dollar loans.

Source : economictimes.indiatimes.com