As more skeletons are unearthed from bank cupboards, the ultimate sufferer seems to be the country’s exports and its image abroad. The fallout of the Punjab National Bank scam has started affecting foreign trade. It is imperative for the commerce ministry to act swiftly and safeguard the country's image overseas, otherwise exports are bound to fall. Now, overseas buyers are reluctant even against 2 per cent normal performance bond or bank guarantees. In some cases, exporters are reluctant to accept letters of credit as the Indian banks tightened the screws of trade financing.
Be it a regular exporter or importer, banks have become dead slow to act on pre-shipment or even post-shipment financing and even packing credits. If buyer's credit is not granted via Letters of Undertaking (LoUs) to credible export houses, trading houses, super star trading houses, which import high value gold, diamonds for export, the end result could be utterly disappointing. The SWIFT system is the basic transfer route for monies to be sent between banks and use of this by bank staff at lower levels is not new. What is required is a software check to avert any misuse. It happened in India and it can happen elsewhere. Banks, instead of jeopardising trade finance route to facilitate exports and imports, must immediately speak to the SWIFT service provider for a solution to avert misuse. North Block’s Department of Financial Services should come forward to take it up with SWIFT, Belgium, in the interest of global banking safety. Besides this, banks must be instructed to facilitate trade financing as usual with adequate monitoring mechanisms in place. This will help to ensure export momentum witnessed in the last one quarter and reduce the widening current account deficit.
A Sathyanarayana Delhi
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201 · E-mail: letters@bsmail.in
All letters must have a postal address and telephone number
