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RBI must ensure rupee export credit at repo rate: EEPC India

Rreductions in the REPO rates by the RBI have not been passed in full.

, ET Bureau|
Jun 07, 2019, 06.32 PM IST
The interest rate on export credit in foreign currency to exporters in the MSME sector should be capped at LIBOR plus 100 basis points while RBI should ensure that the rupee export credit should be given at the REPO rate, EEPC India stated at a meeting convened by minister of commerce, industry & civil aviation with top export promotion organisations, RBI and Bankers June 7 in New Delhi.

In its presentation , the EEPC India former Chairman, Mr P K Shah said, for export credit in foreign currency to the MSME sector only the interest rate should be capped at LIBOR + 100 basis point, a release issued by EEPC said.

After deregulation of interest rates, exporters are being charged as high as LIBOR plus 4 per cent and even higher. Accordingly, the deregulation has instead of lowering the interest rates, increased the same so much that the purpose of accessing export credit in foreign currency is defeated. Globally interest rates are currently in the range of 0.25 per cent to 2 per cent.

Further, for imports buyers' credit is available at Libor plus 1 per cent; thus there is no reason that export credit in foreign currency should have such a high rate of interest. The RBI may consider refinance in foreign currency to the
banks,the EEPC India presentation said.

It said export credit should be extended against ECGC cover for pre-shipment and post-shipment along with hypothecation of stock and there should not be insistence for any other collateral securities.

The reductions in the REPO rates by the RBI have not been passed in full, as the Governor Mr Shaktikanta Das himself had said in the credit policy review.

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