Engg exporters unhappy over move to replace credit refinance

A section of exporters have expressed displeasure over the RBI's decision to replace export credit refinance facility with the provision of system level liquidity from February 7, saying this will discourage banks to disburse credit when the key lending rate falls.
Engineering exporters' body EEPC India said the move will put exporters in further distress, who are already grappling with a steep decline of over 11 per cent in January shipments.
"This (replacing export credit refinance with system level liquidity) would discourage banks to disburse credit to exporters when the repo rate falls. In the absence of interest subvention, the impact would be even more severe," EEPC India Chairman Anupam Shah said.

He said one of the reasons for banks extending export credit in relatively softer terms was because they had the option to refinance such credit from RBI at the repo rate, which is no longer the case.
Registering the steepest decline in two and a half years, exports contracted by 11.19 per cent to USD 23.88 billion in January.
Shah said while engineering exports have managed to buck the trend of falling outbound shipments, it may not last long given the problems confronting economies of key destinations in Europe, Japan, Africa and South East Asia.
"Instead of making exports a priority sector as the RBI had indicated earlier, the central bank has taken a step which will further dissuade banks from encouraging export credit," Shah said.

The central bank had decided to replace export credit refinance facility with the provision of system level liquidity with effect from February 7.