Commerce ministry, RBI to review regulatory norms for Exim Bank

The Reserve Bank of India (RBI) and the commerce ministry will next week review regulatory norms for the Export Import Bank of India (Exim Bank) to enhance capital base, leverage and cap on single borrower exposure. This is part of efforts to push project exports.

Yaduvendra Mathur, chairman and managing director, EXIM Bank, said it was seeking differentiated treatment in regulation and yet stay within RBI's regulatory ambit to imbibe best governance practices.

At present, the banking regulator treats Exim Bank on a par with commercial banks for applying prudential norms. This would be for applying cap on single borrower exposure and leverage - the amount of borrowings linked to net owned funds.
 

These issues would come up for discussion at meeting to be convened by the commerce ministry on May 30. One RBI governor is expected to attend the meeting which is a follow-up after the reconstitution of Board of Trade. The Government of India, which holds 100 per cent stake in the export credit agency (ECA), had infused Rs 1,300 crore as capital each year in 2014-15 and 2015-16. For 2016-17, the government has allocated Rs 450 crore.

There is a growing emphasis on financing project exports, especially after a sharp slowdown in the global economy, which has hit demand both in the merchandise and services segment.

Senior Exim Bank executives said to support Indian companies to bid for big ticket projects, the ECA also needed to have a large capital base. Additional injection of capital of about Rs 1,300-1,500 crore each year for three years would help to reach the Rs 10,000-crore mark, up from the current capital base of Rs 6,500 crore.

Closely linked to capital is the issue of leverage. At present, RBI allows the ECA to borrow 10-11 times its capital base. "This is lower than what fellow ECAs developed and emerging are allowed to borrow. At the lower end it is 15 times and above 50 times (in case of China). "There is need to allow us to leverage more, say 15 times," an EXIM Bank executive said.

Referring to the single borrower exposure limit, one banker said it was capped at 15 per cent of net owned funds

While limits were useful to maintain discipline, some leeway was necessary for taking exposure to Indian companies with a strong financial profile and risk management practices to compete abroad especially in the infrastructure space, officials said.