Textile exporters welcome RBI credit policy

The textile and garment exporters are ecstatic about the new credit policy, announced by the Reserve Bank of India (RBI).

For the first time, the central bank has allowed Indian banks to counter-guarantee the loans that they raise from foreign financial institutions.

Speaking to Business Standard, chairman of the Federation of Indian Exporters Orgnisation (FIEO),western region S K Saraf said, "This year onwards, after the removal of quota-based restrictions on textile and clothing exports, Indian textile exports are poised for a quantum jump and the new RBI policy has given, a shot in the arm to the textile industry."

Out of around $80 billion Indian exports, nearly 20 per cent comes from the textile and garment sector, Saraf pointed out.

He further said, "While foreign financial institutions offer loans at 3-5 per cent interest rates, in India, the rates are between 8-10 per cent. In the case of textile exports, it used to be even more than that, as at one point of time, much of the non-performing assets (NPA) of the Indian banks came from the textile sector. With the RBI allowing Indian banks to counter-guarantee foreign loans raised by the textile exporters, the textile sector can access, cheaper finances from abroad and increase their competitiveness in the world market."

This will not only give the textile exporters access to cheaper finances from abroad, but also force the Indian bankers to change their outlook towards the textile sector and offer competitive interest rates so that they don't lose business to foreign banks, he claimed.

The chairman and managing director of Dena Bank M V Nair said, "India has a competitive advantage in the textile sector and the new credit policy from the RBI will help the Indian banks."