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Worried over rising trade deficit, the Commerce Ministry has suggested the Reserve Bank liberalise packing credit scheme for exporters to encourage shipments.
"We would request that RBI's special export credit refinance to support PCFC (packing credit in foreign currency) (and it) may be enhanced from 50% to 100%," Commerce Secretary S R Rao said in a letter to RBI Governor D Subbarao.
The scheme, he said, should be liberalised "to the maximum extent possible through greater refinance margins. It should enhance the overall quantum of refinance available and bring in long term stability to this policy, so as to encourage better export finance planning by both the exporters and concerned banks."
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He further said the RBI's special refinance window for PCFC by way of US Dollar-Rupee swap facility has been extremely well received by the exporters and commercial banks.
The SME sector is also needed to be encouraged, Rao said, urging the apex bank to ensure the sector has access to foreign currency loans for exports from Indian banks at a ceiling of LIBOR plus 200 bps.
India's trade deficit widened to $20.1 billion in May due to high gold imports while exports declined by over a%, raising concerns about economic recovery. The deficit gap was at $16.9 billion in May last year.
According to latest information, gold imports plunged by over 80% in June as government measures including a hike in customs duty tapered demand.
The current account deficit narrowed down to 3.6% of GDP in the January-March quarter but totalled a record 4.8% for the full 2012-13 fiscal.
