Proposed Base Rate likely to benefit MSME exporters: FIEO

Exporters today welcomed RBI's proposal to shift to the base rate system for pricing of loans, saying the move would help in raising competitiveness of Indian goods in international markets by 3 to 4 per cent.

The Federation of Indian Export Organisations (FIEO) said the proposal would immensely benefit Micro, Small and Medium Enterprises sectors which normally get credit at a much above rate compared to big corporates.

The MSME sector contributes about 40 per cent to the country's exports. India's exports are on the negative zone since last October due to the global slump in demand.

"There is a need to incentivise export credit for exporters to be globally competitive. If this happens (base rate mechanism), it will impart 3 per cent to 4 per cent competitiveness to Indian exports," FIEO President A Sakthivel said.

On October 20, an RBI working group had recommended the replacement of the BPLR system with a base rate mechanism.

Under the proposed mechanism, all banks will be required to declare a base rate and charge interest rates over that depending upon the credit profile of the borrower and repayment period.

FIEO also said the RBI's working group recommendation to disseminate the Base Rate and Range of Actual Lending Rates by banks would avoid any possibility of unhealthy practice by banks.