The Reserve Bank of India (RBI) today eased the rules governing interest rates for loans taken by exporters as a recession in the US and Europe, its biggest markets, dampened demand for the nation’s products.
RBI said the interest on overdue bills up to 180 days will be charged at not more than the benchmark prime lending rate (PLR) minus 2.5 percentage points.
India’s overseas shipments fell in October for the first time in seven years, hurting the profit of exporters reeling under the impact of waning global demand. Easier credit rules, along with the central bank’s interest rate cuts for the third time in less than two months, will help exporters.
“The measure will help reduce the cost of credit to exporters who are facing the most stressful time as demand dries up in the US and other European countries,” said Ajay Sahai, director general of the Federation of Indian Export Organisations.
Exports in October fell 12 per cent to $12.8 billion from a year earlier. The last time exports fell was in October 2001, when they declined 7.4 per cent, according to the data compiled by Bloomberg News.
“Exporters who have drawn bills for shorter maturity and are facing difficulties in realising the bills on due dates on account of external problems will benefit,” the bank said.
The worst financial crisis since the Great Depression has pushed economies from Japan to Europe into a recession, cutting the demand for goods made in the Asia-Pacific region. Flagging exports and waning domestic demand is forcing companies in India to cut production, weakening growth in an economy expected by the central bank to expand at the slowest pace in four years.