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Poor credit growth & rate of credit is cause of concern - FIEO

Oct '09
Mr A Sakthivel, President, Federation of Indian Export Organisations(FIEO) while commenting on the credit growth which has been the lowest in 12 years at 10.75% upto October 9, 2009 vis-à-vis the previous year, stated that the credit growth is nearly half of what was projected (20%) by RBI for the year ending March 2010.

The credit projections may undergo realistic downward revisions with the 2nd quarter review of monetary policy on 27th October, 2009 by RBI.

Measures are being taken the world over to stimulate consumer spending and demand so as to improve credit off-take and generate employment in economies added Mr Sakthivel.In order to stimulate demand China has earmarked funds to the time of $ 585 bn. subsidies in textiles have gone from 8 to 12% & a 17% export VAT rebate has also been provided.

FIEO Chief stated that while companies are keeping their expansion plans on hold many of them prefer to take funds from the equity market due to better leveraging.The cost of finance besides being high in itself is made more uncompetitive by add on costs of the nature of service charges like LC advising charges, enhancing of credit limit, amendment charges etc.

Mr Sakthivel strongly advocated to reduce interest rate on pre and post shipment credit in foreign currency from LIBOR + 350 basis points to LIBOR + 100 basis points in view of increased flow of dollar into economy.Besides, foreign bank are providing such loan at LIBOR +50 basis points.

Federation of Indian Export Organisations (FIEO)

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