Exim Bank Disbursements Down 50%
Loan sanctions and disbursements of the Export Import Bank of India has fallen by 40 to 50 per cent in 1996-97 from the previous year, reflecting the tardy growth in the export sector.
The bank has, however, managed to score an increase of over 25 per cent in net profit which will be of the order of Rs 140 crore. It is currently giving final touches to its annual financial statement.
The main reason for improved profitability is its earnings from import finance which offers a margin of 200 basis points. The bank now plans to raise $300 million in oversees loans this year to enlarge its import finance business.
The banks loan sanctions fell by about 50 per cent from Rs 2,465.74 crore in 1995-96 to Rs 1,242 crore last year.
The sanctions were even lower than the revised projection of Rs 1,523 crore which was made after it became apparent that exporters were not interested in pre-shipment credit in foreign currency.
Low sanctions in 1996-97 will have a telling effect on its loan disbursements in the current year. It has projected a disbursement level of Rs 1,511 crore for 1997-98 which will be difficult to meet.
Exim Banks disbursement has fallen from Rs 2,130 crore in 1995-96 to Rs 1,257 crore last year, a drop of 41 per cent. The disbursement was lower than the revised projection of Rs 1,286 crore for 1996-97.
We are now focusing on high-growth areas like information technology, auto components, pharmaceuticals besides targeting companies receiving foreign direct investments and foreign companies setting up production bases in India, S Shreedharan, resident regional representative of Exam Bank, told Business Standard.
The strategy will enable the bank to achieve the projection of Rs 1,700 crore in loan sanctions and Rs 1,511 crore in disbursements in the current year, says Shreedharan.
We are also funding Indian companies setting up production bases abroad, he said.
Exim bank raised funds from the oversees market at rates of 30-40 basis points above Libor and lends at about 200-240 basis points over Libor.
The main reason for the fall in loan sanctions and disbursements is that exporters are finding it cheaper to access finance in rupees at the rate of 13 per cent prescribed by the Reserve Bank.
Exporters then book forward cover at premiums of 8-9 per cent. As a result the fund cost works out to 5-6 per cent, much lower than 8-9 per cent charged by Exim Bank for loans in foreign currency.