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High volatility in exchange rate is cause of concern: FIEO to RBI
25
Oct '10
While attending the Mid term Credit Policy review meeting with Governor RBI in Mumbai, Mr A. Sakthivel, President, Federation of Indian Export Organisations (FIEO) said that the high volatility in the exchange rate is a cause of concern. To ensure that both the economy and exports are sustained at the existing levels volatility in rupee needs to be contained by placing restriction on minimum period of investment by FII of atleast 12 months. FII should be allowed repatriation only after investment remains in India for 365 days or more.

Highlighting constant decline in Export credit as a percentage of net bank credit which fell to as low as 4.1% on 15th January 2010,President, FIEO requested RBI to consider that 50% of the total export credit should be earmarked to MSME sectors so as to ensure regular and seamless flow of credit to the export sector.

The related issue of non-availability of dollar denominated credit for exports was also flagged by FIEO as exporters are of the view that banks normally prefer to provide credit to the corporate over exporters. Mr Sakthivel asked RBI to give clear direction to the banks that exporters should be provided priority in allocation of foreign currency denominated credit.

Referring to increase in export credit rate under base rate, President, FIEO observed that in the PLR regime, exporters were getting pre and post shipment credit at-least 2.5% below the PLR, if not at further lowered rate but in the base rate regime banks have been freed to charge interest rate above the base rate.

Banks are charging export credit 150 to 200 basis points above the base rate which make the export credit rate under the Base Rate Regime more costlier than in the PLR regime. Reserve Bank of India should consider to instruct banks to provide export credit at the base rate itself.

A number of issues relating to high bank charges which are adding to the transaction cost of Indian exports were also raised by FIEO.

Federation of Indian Export Organisations (FIEO)


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