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| Exporters to meet banks tomorrow | |
| BS Reporter / Mumbai November 25, 2008, 0:16 IST | |
Fearing a cut in financial support from banks as a result of a global slowdown, exporters, especially from small and medium enterprises (SMEs) across industries, will meet bankers on Wednesday for continued assistance.
“This meeting will look at all the segments of exports. We will like to understand their conditions and issues,” said T S Narayanasami, chairman and managing director, Bank of India, and chairman of the Indian Banks’ Association (IBA).
While large companies have received attention, so far banks have not looked at small units. “They should not be left out as they are crucial for employment and business activity,” he added.
Bankers said many export units are under a stressed liquidity position due to substantial debt and low-cash accruals, leading to delays in repayment to banks and overdrawn limits. Liquidity has been further stretched by the slowdown in export sales of companies, adversely affecting their cash flow.
The export units, which make products having higher import content, are exposed to risks relating to volatility in raw material prices and foreign exchange fluctuations, they added.
Vasant Mehta, the chairman of Gems and Jewellery Export Promotion Council, said every industry is going to look for a reduction in the cost of funds. Banks should not curtail finance and credit limits when units are passing through tough times, he added.
Though jewellery units are facing a contraction in demand, it will not necessarily lead to a sharp rise in defaults, causing worries over mounting bad assets, Mehta added.
The engineering industry is also reeling under the effect of the slowdown. There have been instances where banks have not honoured documents and reduced the limits when they came up for renewal. “We understand the stance of banks that they should be cautious in present times. But they need not be over-cautious” said Rajesh Shah, the chairman of the special task-force on global crisis formed by the Engineering Export Promotion Council.
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