Refinance Rate Reduced To 7 Per Cent

The Reserve Bank of India (RBI) yesterday announced a two percentage point cut in the export credit refinance rate to seven percent from nine percent.

It also implemented a cut in export credit interest rates to nine percent from 11 percent as announced by the Union Commerce Ministry on Wednesday.

The revised rates, effected yesterday, will be valid up to March 31, 1999, after which status quo will be restored, a central bank statement said.

For pre-shipment credit schemes upto 180 days, the rate is nine percent against 11 percent earlier; beyond 180 days up to 270 days it is 12 percent against 14.

Under post-shipment credit schemes, rates were down to nine percent from 11 percent earlier.

"The easing of rates would provide relief to Indian exporters who were facing negative growth. But banks, particularly public sector ones don't need refinance as they can borrow from the call market," said K Kannan, chairman and managing director, Bank of Baroda. Indian export growth slowed over the last two years. In 1997-98 it grew a mere 2.64 percent to $33.98 billion.

Latest figures released by the Directorate General of Commercial Intelligence and Statistics, showed a fall in export growth of 17.22 percent in May this year to $2,369.27 million against $2,862.33 million last year. Kishor Shah, convenor of the banking committee, FIEO, said, "It is definitely a step in the right direction."