The Reserve Bank of India is expected to bring down the export refinance limit from the present level of 15 per cent of outstanding credit in the April 29 credit policy even though the banking community is clamouring for a raise in the refinance level.
The RBI has been following a policy of phasing out of export refinance as, under the World Trade Organisation (WTO) agreement, special concessions to the export sector need to be abolished within a stipulated time frame.
The Reserve Bank of India (RBI) took the first step last April when it rationalised export credit refinance facility, bringing it down from 100 per cent of the incremental export credit to 15 per cent of the outstanding credit level. Sources feel it may be brought down to 7.5 per cent before abolishing the refinance facility totally by the end of the year.
Two-third of the refinance facility from the RBI is at the bank rate (6.5 per cent), while the balance is at the market related rate linked to Mibor. Bankers want the entire chunk at the bank rate.
Under the WTO globalisation programme, the member countries (including India) are obliged to lower their customs tariffs to facilitate greater access to foreign imports into their markets.
The RBI pegged the export finance rate at 250 basis points below the banks
