Mumbai, Feb. 20 The lack of demand from overseas markets due to recession has led to a slowdown in export credit. Despite the Government offering subsidies in the form of subvention to banks and lower interest rates to exporters, there seems to be few takers for loans, said bankers.
While the slowdown started after September 2008, it has become more pronounced from January 2009. The figures up to December 2008 show a marginal rise for export credit, for most banks.
According to Mr S.C. Jain, General Manager, SME, Bank of India, the bank has seen a decline in drawdown by exporters in several sectors, particularly in diamond and gem and jewellery. “Exporters’ payments are getting affected as exports have reduced. Banks are seeing a slowdown in their outstanding credit to exporters,” he said.
Cheaper rates of no help
However, an official from Bank of Baroda also said export payments are getting delayed.
“Simply because of a reduction in interest rates, demand does not pick up. It does provide some support on the pricing front, but there has to be creation of demand. World over there is recession and exporters do not want to be aggressive right now,” he said.
The government had announced a series of measures including provision of pre-shipment and post-shipment credit at competitive rates, extension of duty neutralisation scheme till end-December 2009 and a committee to address procedural problems plaguing exporters.
In the Interim Budget 2009-10, the Government also extended the interest subvention of 2 per cent on pre-shipment and post-shipment credit for sectors such as textiles carpets, leather, gem & jewellery, marine products and SMEs from March 31, 2009 till September 30, 2009, which amounts to an outgo of Rs 500 crore.
Export growth slows
The country’s export growth has slowed down to 17 per cent for the period April-December 2008, against 23.5 per cent in April-December 2008, according to government data.
As a measure to deal with potential defaults, banks are taking stock of their export portfolios and restructuring accounts on a proactive basis. But as Mr Jain pointed out, “If a foreign buyer defaults it is beyond my customer’s control.”
An official from Union Bank of India also said that the demand for pre-shipment and post-shipment credit is drastically coming down.
“We are not seeing further credit from India because the slowdown is more severe abroad. The subvention given by the RBI may not help unless demand picks up,” he said.
Bankers hope that the stimulus package announced by the Government and the RBI, which includes providing deferred credit to exporters and providing lines of credit to foreign countries, will help create demand for Indian exports.
Source : Business Line