Date:15/04/2006 URL: http://www.thehindu.com/2006/04/15/stories/2006041503951500.htm

Business

Revamp credit system to boost exports: FIEO

Special Correspondent

Plea for access to offshore banking units

NEW DELHI: In the run up to the Reserve Bank of India's credit policy, the Federation of Indian Export Organisations (FIEO) has called for a revamp of the credit system to boost exports. It has suggested measures, including setting up of a committee on accessing offshore loans and providing flexibility to exporters in investing foreign currency earnings.

In a memorandum submitted to RBI Governor Y. V. Reddy, the apex body of exporters has pointed out that the amount of credit lent to the export sector continues to be less than the 12 per cent target set by the central bank. The share of export credit in net bank credit improved only marginally to 7.6 per cent in 2003-04 from 7.4 per cent in the previous year, despite higher export growth during the year, it pointed out.

It has, therefore, urged easing existing norms for providing export credit to exporters with a good track record.

The FIEO has also proposed that exporters with a good track record be allowed to access loans from offshore banking units based in special economic zones (SEZs). Describing SEZs as "engines of export growth,'' it says these zones will have a share of 1.5 per cent in global exports by 2010.

In addition, the memorandum has suggested the setting up of a committee to study the possibility of accessing offshore loans by first class borrowers. The proposal, it said, was backed by the fact that offshore banks were outside the direct control of any central bank, providing loans at cheaper interest rate.

Besides, it has recommended that exporters be allowed to place their exchange earners foreign currency funds on interest bearing investments and demanded flexibility for purchase of assets in business transactions.

This will be one of the measures needed to offset the high transaction costs borne by exporters. Another step aimed at cutting transaction costs can be, it is suggested, permitting Gold Card holders to open bank accounts anywhere in the world in correspondent branches of the Indian banks. Such amounts can be routed through Indian banks, if so required, it is pointed out.