The Reserve Bank of India (RBI) on Friday extended support to exporters and cash-strapped housing finance companies. In a statement, it said that effective from Monday, the period for post-shipment export credit will be doubled to 180 days to help exporters who find it difficult to access funds. This first slab of export credit facility is available at concessional interest rate of a 250 basis points below the benchmark prime lending rate.
The move came within hours of RBI Governor D Subbarao’s meeting with banks' chairmen. Credit flow, liquidity and specific demands made by small and medium enterprises and exporters came up for discussion in the meeting.
“Our feedback to RBI was that short-term liquidity is comfortable,” a banker said. After a slew of measures including a 350 basis points cut in the cash reserve ratio (CRR) to 5.5 per cent and statutory liquidity ratio from 25 per cent to 24 per cent, the banks have more resources at their disposal for deployment. The pressure on inter-bank overnight lending market has also eased as seen in lower call rates which remain below repo rate, a bank chief said. RBI officials did not give any indication about any other round of steps including lending rate cut or further drop in the CRR.
Bankers conveyed the demand by SMEs to relax the non-performing asset classification norms. The industry has demanded that accounts should be declared as an NPA only when the payment remains overdue for 180 days instead of present 90-day norm.
While no announcement was made on the issue, RBI expanded the ambit of liquidity support facility, currently available for mutual funds and non-banking finance companies, to include housing finance companies to meet their funding needs. It also extended the term of facility by 3 months to June 2009. Banks can use liquidity support made available by RBI through relaxation in the maintenance of statutory liquidity ratio (SLR) up to 1.5 per cent of their deposits.
The central bank also extended the tenure of foreign exchange swap facility for Indian banks to meet dollar demand of their overseas offices by three months to June 2009. On November 7, 2008, RBI had decided to provide forex liquidity for up to 3 months to public and private sector banks (having foreign branches or subsidiaries to give them flexibility in managing their short-term funding needs of overseas offices.
Banks were facing shortage of foreign currency due to drying up liquidity in global financial markets. But, most Indian banks like State Bank of India, ICICI Bank with significant overseas presence have not used this facility since they have adequate foreign currency at their international branches.
RBI also decided to continue refinance facility for commercial banks till June 2009. Under this facility, banks can get refinance up to one per cent of their deposit liabilities at repo rate for maximum 90 days. During this period, refinance can be flexibly drawn and repaid. This facility can be rolled over.
