The Federation of Indian Export Organisations (FIEO) wants banks to step up flow of credit to exporters. In a meeting with the Reserve Bank of India and bankers, the industry body pointed out that export credit, both as a percentage of net bank credit as well as a percentage of exports, was declining. This declining trend in export credit is proving a big handicap for the tiny and small units, which are not getting timely credit to meet their export orders.

Mr Rafeeque Ahmed, President, FIEO, said banks’ export credit flow has come down to less than 13 per cent from 19 per cent three years ago.

EEFC

FIEO suggested complete lifting of the restriction of retaining only half of the outstanding balances in EEFC (Exchange Earner's Foreign Currency) account for gems & jewellery, electronics and petroleum sector while the cap could be increased to 75 per cent for plastics and other sectors having import intensity of over 50 per cent.

Further, exporters should be asked to convert 50 per cent of the export proceeds into rupees only after 15 days of credit to his account, in case he has not used the same within 15 days for transactions permitted through EEFC account.

Given that export refinancing has increased from 15 per cent to 50 per cent and this is likely to augment banks’ liquidity by Rs 30,000 crore, Mr Ahmed said, this must translate into credit for exporters and not just remain on paper.

The liquidity generated through export refinancing will increase banks’ credit flow to the export sector from 13 per cent to 15 per cent but there is still a gap of 4 per cent which must be filled, said Mr Ahmad.

> beena.parmar@thehindu.co.in

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