Latest Indian apex bank stand disappoints AEPC

Apparel SMEs were expecting a rate cut of 0.5% which is mainly required to remain competitive in the international market due to higher interest rate.

The median lending rates on pre-shipment Rupee export credit upto 180 days ranged between 10.55 – 13% in end 2012 as compared to 10.75 – 12.88% in March, 2012. These remain high in same range.

Dr. Sakthivel noted that in last financial year the Tirupur district banks had fixed a credit target of Rs.3,661 crore, whereas the credit availed by the units were only Rs.2,742 crore which is 75% of the  target.  Out of Rs.70000 crores of garment exports, approx. Rs.52000 crores exports is from SME sector (75%).  The Industry is not able to take credit at such high rates and losing its competitiveness in the world market.   

At the beginning of the 12th Plan period, the outstanding credit gap for the MSME sector is estimated at 62%, which is estimated to reduce to 43% in March, 2017 with the assumption of minimum 20%year-on-year credit growth to MSME sector. Thus rate cut is necessary to achieve this and reduce gap.  The figures truly reveal that the units are reluctant to avail the credit due to higher interest rate apart from market conditions.

The garment exporting units are expected to invest in product development and also replace the old machineries to remain productive and therefore, the credit needs are required to be replenished at a flat rate of interest.  AEPC has proposed a flat rate of 7.5% on pre and post shipment export credit under a separate chapter for exports.

Apparel Export Promotion Council