RBI asks banks to regularly review export credit limit

RBI's notification further said that it is observed that the export credit limits are calculated in Indian rupees and the limit is apportioned between rupee and foreign currency components depending upon the borrowers' requirement

Reserve Bank today asked banks to review the export credit limit on a regular basis to help insulate exporters from rupee fluctuations.

"We have examined the issue and banks are advised that they may compute the overall export credit limits of the borrowers on an on-going basis say monthly based on the prevalent position of current assets, current liabilities and exchange rates and re-allocate limit towards export credit in foreign currency, as per the bank's own policy," RBI said in a notification.

This may result in increasing or decreasing the rupee equivalent of foreign currency component of export credit, it said.

The rupee has depreciated over 20% against the dollar since May. It has been trading at 63 level after hitting its life-time low of 68.85 in August-end.

The notification further said that it is observed that the export credit limits are calculated in Indian rupees and the limit is apportioned between rupee and foreign currency components depending upon the borrowers' requirement.

While the overall export credit limits are fixed in rupees, the foreign currency component of export credit fluctuates on the basis of prevailing exchange rates, it said.

Alternatively, banks may denominate foreign currency component of export credit only with a view to ensure that the exporters are insulated from rupee fluctuations, it added.

The foreign currency component of export credit, sanctioned, disbursed and outstanding will be maintained and monitored, it added.