NEW DELHI: The crisis in the export sector has not abated. The country now faces the prospect of slipping on the export target for the second year.
In an emergency move to stem the decline, the government is urging banks to increase lending to exporters.
Commerce ministry officials seem to be apprehensive of reaching the $200 billion target set for the year. Officials told Bloomberg UTV that exports will be in the range of $170-175 billion.
The problem has been aggravated by lack of credit, say exporters. Even though RBI has reduced the rate of interest on foreign currency loan to LIBOR plus 200 basis points from LIBOR plus 350 basis points, banks are not lending.
Exporters also complain that banks levy service charge and management charge among other charges over and above the loan rate.
Ajay Sahai, director general, Federation of Indian Exporters Organisation (FIEO), said: "We have written to the commerce ministry and to the finance ministry in this regard... banks are not lending at the rate of LIBOR +2% even when they have excess funds this is hurting the industry as most exporters are dependent on dollar credit for shipments."
The commerce ministry is now seeking the finance ministry's help in persuading banks to lend.
Commerce Minister Anand sharma said:"Banks will have to lend... we will take the issue to the inter-minsterial group."
Source : bloombergutv.com