AEPC urges RBI to exempt exporters from penalty on forward covers

Apparel exporters on Friday urged the Reserve Bank to protect them from penalty on forward covers due to exchange rate fluctuations in this crisis situation due to the lockdown.

Apparel Export Promotion Council (AEPC) Chairman A Sakthivel said that exporters are concerned about the sharp fluctuations in the currency in the last few weeks and the resultant penalty that banks are charging on account of cancellations and exchange rate differential charges for the period for which the forward cover was booked.

In a letter to RBI Governor Shaktikanta Das, he said: "It is requested that the charges for exchange rate fluctuations and cancellations are waived for the period for which export orders have been cancelled due to COVID-19".

Seeking immediate attention of the central bank, he said the charges presently accruable on account of such forward-cover cancellations by exporters is significant and can be a big loss to the sector which is already facing a cash crunch.

The apparel exporters are facing large number of export order cancellations even as recurring expenditure, including payment of wages, continue, he added.

He also urged the governor to take up the matter with the government for announcement of 5 per cent interest subsidy to exporters for the entire apparel export industry.

He added that the measures announced by the RBI on Friday would help the industry in mitigating the present crisis.

"The provision of special refinance facilities for a total amount of Rs 50,000 crore to NABARD, SIDBI and NHB to enable them to meet sectoral credit needs and the reduction of the reverse repo rate by 25 basis points to 3.75 per cent to encourage banks to lend more would be beneficial," Sakthivel said.