Govt panel to take up export credit issues with bankers .

New Delhi, March 9 Taking serious note of the difficulties faced by exporters in getting affordable credit, a high-level committee, comprising Commerce and Finance Secretaries, will soon hold a meeting with top officials of the Indian Banks' Association and some leading banks to sort out the issue.

As a prelude to the meeting, the Commerce Ministry recently sent to the Finance Ministry a list of cases where exporters were either denied credit or were asked to pay high interest rate and other charges.

Higher charges

The Commerce Secretary, Dr Rahul Khullar, told Business line, “We have come across cases where exporters were denied credit by some commercial banks. There were also cases where interest rate and other charges that the banks sought from exporters were so high that it was tantamount to denying the loan.”

“Exporters have informed us of their grievances. Banks also may have their points of view. The meeting by the committee will sort out these. I have sent to the Finance Secretary a list of cases that we have gathered,” he said.

Mr A Sakthivel, President, Federation of Indian Export Organisations (FIEO), said banking charges have become a major component of the high transaction costs incurred by exporters and the charges are making India's exports less competitive.

Mr Sakthivel said banks take processing charges of Rs 400 per Rs 1 lakh subject to a maximum of Rs 20 lakh on renewal of limits. This means, if an exporter goes for renewal of a limit of Rs 50 crore, he has to pay Rs 20 lakh as processing charges, he said, adding these charges should be levied only on grant of a new limit and not on the renewal.

Also, in cross-currency booking, banks charge their own mark-up on the margins between the spot and forward rate for quoting forward quotation. With this, banks earn on each transaction, be it buying or selling. Banks also charge for negotiating documents, apart from booking and cancellation charges against every booking of forex with them, he said. According to norms, foreign currency credit should be available at LIBOR plus 200 basis points. But banks charge around Rs 0.25 a US dollar or other foreign currencies against RBI's specification that the banks should not levy such charges, Mr Sakthivel said. Besides, small and medium exporters are facing difficulties in getting pre-shipment foreign currency credit, he said.

In addition, banks charge 3-4 per cent yearly interest for payments received beyond due date and this is making life difficult for exporters due to the delay in export realisations from foreign buyers, he said.

He said though the RBI does not insist on collateral in case of irrevocable letter of credit, banks demand collateral security from exporters.

India's export credit as a percentage of net banking credit fell from 5.5 per cent as on March 28, 2008 to 4.6 per cent as on March 27, 2009 and further to 4.1 per cent as on January 15, 2010, the Economic Survey showed.

Source : Business Line