Companies having active treasury operations should opt for loans benchmarked to government security (G-sec) so as to insulate themselves from the pressure of rising interest rates, according to Mr T. C. A. Ranganathan, Chairman and Managing Director, Exim Bank (Export-Import Bank of India). Exim Bank offers loans to support overseas trade operations.
“Our interest rates are raised in tandem with the market. If companies want to insulate themselves from the pressure due to rise in interest rates, then the best thing for them is to go for G-sec-based borrowing, as it is the most market-friendly,” he told newspersons on the sidelines of a banking conclave organised by the Federation of Indian Chambers of Commerce and Industry here on Friday.
Exim Bank recently introduced loans benchmarked to the G-secs, with one-year residual maturity.
“Such loans rise in tandem with the market but when the liquidity position improves, these loans are usually the first ones to fall. Loans linked to G-secs are completely transparent. We feel corporates must be assisted in protecting themselves so we started giving such loans three-to-four months back. Companies are showing interest in such loans,” he said.
Small- and mid-sized companies in the eastern region should adopt a cluster approach and increase value addition to enhance exports from the region, he said.
Cluster approach
“Instead of individual efforts, firms should adopt a cluster approach to enhance their sourcing of orders and raw materials, fulfil their commitment to bulk export orders, enhance economies of scale and facilitate access to finance,” he said.
Eastern region accounts for close to one-fourth of the country's total tanneries exports and two-thirds of leather goods exports. It also accounts for two per cent and seven per cent of the country's total chemical and engineering exports respectively.