Reduction in Export Credit Re-finance limit will affect availability and push cost of credit: M.Rafeeque Ahmed, President, FIEO

Commenting on the Bi-monthly Monitory Policy statement of the Reserve Bank of India issued today, Mr M Rafeeque Ahmed, President, Federation of Indian Export Organisations (FIEO) said that reduction in the Export Credit Re-Finance (ECR) from 50% to 32% will affect both the availability and cost of credit which will be detrimental to competitiveness of Indian exports at a time when Global economy is gathering momentum with Global trade forecasted to grow by 4.7% in 2014.

Elaborating further Mr Rafeeque said that banks would be reluctant to lend to the export sector, with the reduction in ECR, which is already facing liquidity crunch, as share of exports credit in net bank credit has come down drastically from close to 9% to3.5% in last ten years.

The cost of credit is also likely to go up between 0.5% to 1% and it is not clear to what extent the special term Repo facility to 0.25% of net demand and time liquidity of the bank will offset this loss said Mr Ahmed. FIEO Chief said that FIEO is pushing to bring exports under priority sector lending and this move has definitely upset us.

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