The Reserve Bank of India's credit policy for the first half of 1998-99 seems to have completely ignored the exporter community. Except a provision for restoration of the limit of 100 per cent, which had been reduced to 50 per cent in the January 1998 package, there is little in the policy to cheer about for exporters.
In the month of Janaury, with a view to sucking out liquidty from the system the RBI had slashed the general refinance limits and export credit refinance limits.
The RBI has also reduced the interest rate on pre-shipment export credit up to 180 days from the existing 12 per cent to 11 per cent with immediate effect.
At the same time interest rate against incentives receivable from Government covered by ECGC guarantee in respect of pre-shipment credit up to 90 days is being reduced from the existing 12 per cent to 11 per cent with immediate effect.
There are some who feel that credit policy has defeated the trade policy. The RBI pronouncements has not at all been aligned with the trade policy announced by the commerce minister Ramakrishna Hegde earlier this month.
The Federation of Indian Export Organisation (FIEO) had made a detailed representation to the RBI which it has chosen to ignore. The expected thrust in the credit policy for exports has thus not come forward. The RBI has reduced the rate of interest on export finance which has been quite high. This was one of the reasons for the slack growth in export for last three years. The pre-shipment credit rate has been reduced by onee percentage point for credit up to 180 days but it has been maintained on the other component. The post-shipment finance, too, has been left untouched, thus missing an opportunity to reduce the cost of funds for the exporters.
Stating that restoration of export refinance is meaningless, Ramu Deora, president, FIEO said that even though the rate of interest on such finance was cut by one percentage point, the rate remains high at 9 per cent, while the repo rates are 7 per cent. The purpose of restoration of 100 per cent refinance is thus defeated.
