 "Lenders say yet to get FY14 export credit subsidy")
The United Progressive Alliance government is yet to pay Rs 1,100 crore of export credit subsidy to banks, the entire amount due for this financial year, bankers say.
Through the government's export scheme, several sectors such as textiles, readymade garments, leather products, handicrafts and engineering products benefit from interest rate subvention of two per cent. Though banks are free to determine interest rates, these cannot be lower than the base rate of individual banks.
Initially, the Reserve Bank of India (RBI) had opposed the government's proposal that banks pay the subsidy benefit upfront, but had later agreed. Banks claim reimbursement from RBI on a quarterly basis.
The government is squeezing expenditure to meet its fiscal deficit target of 4.8 per cent of gross domestic product for this financial year, compared with 4.9 per cent in 2012-13.
For the April-November 2013 period, the government's fiscal deficit stood at 94 per cent of the targeted budgetary estimate of Rs 5.42 lakh crore, raising concerns the 4.8 per cent target for 2013-14 might be exceeded.
The government's finances remain gloomy, owing to high subsidy and challenges in garnering revenue amid a slowing economy. Also, the rupee's sharp depreciation against the dollar in the April-August period has put pressure on the subsidy bill. The rupee has, however, appreciated since September.
Bankers question the way the government treats its subsidy schemes. Across several fora, the finance ministry has prodded bankers to expedite loans to particular sectors to boost exports form these. Bankers say now, they are reluctant to lend.
As of March 2013, the government had spent Rs 5,000 crore as export credit subsidy.
Through the government's export scheme, several sectors such as textiles, readymade garments, leather products, handicrafts and engineering products benefit from interest rate subvention of two per cent. Though banks are free to determine interest rates, these cannot be lower than the base rate of individual banks.
Initially, the Reserve Bank of India (RBI) had opposed the government's proposal that banks pay the subsidy benefit upfront, but had later agreed. Banks claim reimbursement from RBI on a quarterly basis.
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"Banks are required to completely pass on the benefit of interest subvention, as applicable, to eligible exporters upfront and submit the claims to RBI for reimbursement, duly certified by the external auditor. The subvention would be reimbursed by RBI on the basis of quarterly claims submitted by the banks in the prescribed format," said the RBI circular on rupee and foreign currency export credit.
The government is squeezing expenditure to meet its fiscal deficit target of 4.8 per cent of gross domestic product for this financial year, compared with 4.9 per cent in 2012-13.
For the April-November 2013 period, the government's fiscal deficit stood at 94 per cent of the targeted budgetary estimate of Rs 5.42 lakh crore, raising concerns the 4.8 per cent target for 2013-14 might be exceeded.
The government's finances remain gloomy, owing to high subsidy and challenges in garnering revenue amid a slowing economy. Also, the rupee's sharp depreciation against the dollar in the April-August period has put pressure on the subsidy bill. The rupee has, however, appreciated since September.
Bankers question the way the government treats its subsidy schemes. Across several fora, the finance ministry has prodded bankers to expedite loans to particular sectors to boost exports form these. Bankers say now, they are reluctant to lend.
As of March 2013, the government had spent Rs 5,000 crore as export credit subsidy.