RBI may hike lending rates further, says Exim Bank CMD

Soon after the Reserve Bank of India (RBI) raised its key lending rates by 25 basis points, the Export-Import Bank of India said on Sunday that this may not be the last time as the rate-hike cycle may continue due to rising inflation.

This was 12th rate hike by the apex bank in the past 18 months. “This may not be the last time that we are seeing a rate hike, the cycle may continue because of the rising inflation. Industry must also adjust to this high tide level,” said T C A Ranganathan, chairman and managing director, Exim Bank, speaking on the sidelines of an ICC meet here. RBI has raised repo rate by 0.25 basis points to 8.25 per cent and increased the reverse repo to 7.25 per cent.

When asked about the concerns showed by the finance minister regarding the rise in non-performing assets (NPA) of public sector banks, he said, “It is not because of the rise in interest rates, but due to the economic slow down.” He also expects the corporate profit margins to be under pressure too.

The bank has also indicated that Indian exporters are now looking into new terrains due to the present financial situation in the United States and Eurozone. “For exporters, the new regions include Latin America and Africa. I believe that overseas borrowing cost may also be going up soon,” Ranganathan said. Exim Bank is focusing on extending a credit line to regions like Africa and SAARC countries. India has already extended a credit line to Bangladesh and Sri Lanka recently.

Meanwhile, the bank has said that it is keen to finance export clusters in India and urged small exporters to join together for that. “We are encouraging exporters to join together to form clusters, so that it would be easy to finance. Some exporters from Coimbatore in Tamil Nadu, Bangalore and Orissa are already planning to form clusters in those areas,” he added.