Exporters seek loan relief, favorable rupee rate in meeting with RBI

Indian exporters, hurt by punitive tariffs imposed by the U.S., have sought a moratorium on loan repayments and a favorable exchange rate from the country's central bank in a closed-door meeting with top officials, two sources familiar with the matter said on Thursday.

U.S. President Donald Trump imposed punitive tariffs as high as 50% on Indian exports last month, hitting a wide range of industries and prompting the government to come up with a rescue plan to soften the blow.

Sectors such as textiles, chemicals, gems and jewelry, and fisheries are expected to be the worst hit and may be forced to cut jobs as they face uncertainty over order flows and scramble to find new buyers in markets across Europe, Africa and Asia.

Exporters are seeking a 12-month moratorium on principal and interest payments on their loans, according to a written request by the Federation of Indian Export Organisations (FIEO) that was reviewed by Reuters.

The industry lobby has also sought a collateral-free credit guarantee scheme, like the one offered to small businesses during the COVID-19 crisis, where the government guarantees a portion of a loan, giving banks comfort to keep lending to these businesses.

"This breathing space will allow exporters to recalibrate operations," the FIEO said in the note, adding that this would help avoid defaults and ensure the long-term financial health of export-oriented businesses.

India is preparing measures to help exporters deal with the crisis, even as the U.S. and India look at resuming negotiations to address the trade barriers, Reuters reported earlier.

No measures or agreements to reduce tariffs have been announced so far.

Some export organisations have also sought a more favorable exchange rate for their dollar holdings, one of the sources said.

Their requests include the sale of dollars at the real effective exchange rate (REER) of the rupee as opposed to the spot rate.

The REER is an inflation-adjusted exchange rate against a basket of currencies of trading nations and not just against the dollar.

At present, that rate is about 15% higher than the spot rupee/dollar exchange rate and will help exporters get more from their dollar holdings, the source said.

A spokesperson for the Reserve Bank of India did not immediately respond to a query from Reuters.

BANKS RELUCTANT

Indian banks "are prepared" to help New Delhi put together a fiscal package for exporters, but are likely to push back on deferred loan repayments, two banking industry sources said.

Banks are opposed to any plan that would involve a moratorium, one of these sources said.

Financial institutions have been asked to lend liberally to exporters, with the assurance from the government for adequate support in case of stress, this source said.