If the Government, as a major shareholder, reduces the profitability target that it imposes on the Export Import Bank of India, then the credit agency can push more project exports, according to the bank’s new Chairman and Managing Director, Yaduvendra Mathur. The bureaucrat-turned banker feels that maintaining profitability with the given constraints is a humungous challenge. In an interview with Business Line , Mathur speaks about the opportunities, challenges and solutions to increase India’s manufacturing exports. Excerpts:

What will be your focus for the Export Import Bank of India?

My biggest contribution will be to again revisit the bank’s fundamentals as a development finance institution (DFI). In India, commercial and hybrid banks have emerged. The regulatory regimes in India and globally do not recognise DFIs as such because DFIs by their very nature and origin are policy institutions. So, my role will be to re-establish Exim Bank as a DFI. We are constrained by the same rules and regulations that govern a commercial bank which are carrying funds of the common man. There is a requirement to revisit some of these regulatory norms.

Specifically, we would like to scale up the support we provide for project exports so that we can encourage Indian companies to take larger projects globally.

I see the consulting arm of Exim Bank becoming stronger in the next three years. We will focus on the non-funded side more aggressively.

In terms of regulations what do you expect from the RBI and the Government?

Institutions such as Exim Bank, National Housing Bank, SIDBI and Nabard are DFIs. So, they have to be dealt with in a way that they deliver on developmental banking. Without accessing the financial markets they cannot operate.

The policy must be aligned suitably for DFIs to raise capital. Currently, we are able to raise 10-11 times of our net owned funds. If we need to deliver on a larger mandate, then the Government and the RBI should make suitable adjustments either in our leverage ratio or in equity infusions.

If there is suitable relaxation in the leverage ratio, then we can support more project exports from the country.

We have to share 10 per cent of the paid-up capital with the Government. If the Government relaxes this, then project exports can go up. China is competing with us. China is telling countries that they will give cheaper finance than what Exim Bank is giving. If profit targets on us are removed then we can give cheaper loans to countries and they will import from India.

However, it is like a catch-22 situation because now if we don’t show profits, then rating agencies will negatively rate us. When I go to the bond market to borrow money, then my money will become more costly. So, it has to be a healthy blend of profitability and affordability.

Globally, where do you see the opportunities? Where are the constraints?

If you compare Exim Bank of India with Korean Exim Bank and Chinese Exim Bank or Development Bank of China, we are a very small bank. They do 7-10 times more volume of business than Exim Bank of India.

Opportunities are there in Latin America and Africa to engage Indian companies in large infra projects which the Chinese are taking away.

We are looking at engaging with top-notch Indian companies which are not export-oriented. We will connect with them and see why they are not exporting, what is stopping them. If they need to be supported and encouraged, we will do that.

The rupee appreciation in recent times can hit exports. What in your view is the appropriate value of the rupee?

I have no call on that. A strong or a weak rupee is not a policy issue that has to be decided as such. It is a free-float. So, currency should find its own levels. What the system, the regulator and fiscal authorities should do is to see that sharp volatilities are avoided. That is most detrimental. The rupee should not be allowed to be played around like a product. That gaming on the currency should be prohibited.

What can be done to improve manufacturing exports?

It is unfortunate that we shifted more to services and neglected manufacturing. Typically, the input costs for manufacturing are big. For example, electricity for manufacturing is a big handicap, and land availability for SMEs is a challenge. So, State Governments have to be enthused by the Centre. The policy system for manufacturing, especially SMEs, is not very good. Exim Bank is obviously one of the players that support the SME ecosystem. But other players such as the State and Central Governments should also see that SMEs get off the ground and get enough access to cheap credit.

We need to study the global value chain and see where Indian products fit into it. For example, we should work on cotton and textile where India lost out in the last six-seven years and our neighbours took over. Exports should be an engine to create jobs in India.

Manufacturing that creates jobs is the need of the hour. And if the same can be exported, then it will be excellent. Textile fits the bill perfectly.

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