Exim Bank Pares Post-Shipment Credit Rates

The Export Import Bank of India (Exim Bank) has reduced the interest rates on post-shipment export credit. The bank, for the fitst time, has linked the interest rates on export credit to the period of the credit.

Unlike earlier when the interest rate on post-shipment export credit was fixed at 14.5 per cent, Exim Bank has now introduced a three-tier structure. Interest rate for credit up to two years has been fixed at 12.5 per cent, between 2 and 5 years at 13.5 per cent and 14 per cent for credit above 5 years. According to Y B Desai, executive director, Exim Bank, the benefit of lower interest rates need to be passed on to the borrowers and this should help them become more competitive.

 

He also pointed out that exporters are realising their receivables faster and hence are opting for loans with a shorter maturity, less than two years.

Exim Bank is the only institution offering post-shipment credit in dollar at rates linked to Libor and the minimum rate for such credit for 1 year has been reduced to Libor-plus 75-basis points.

It also provides rupee pre-shipment credit above 6 months in participation with commercial banks and charges 12.5 per cent. Desai said the rates charged by the bank to exporters is comparable with the rates being charged in the OECD countries.

According to T C Venkat Subramaniam, executive director of the bank, there has been an increase in the number of companies setting up joint ventures abroad. In 1996-97, the bank sanctioned Rs 74,210 crore to 12 companies for setting up joint ventures or subsidiaries abroad under Overseas Investment Finance programme.

The bank is now planning a foray into non-recourse financing for projects being set up by Indian companies abroad.

Commenting on the performance of the bank in the first quarter, Desai said that there has been no change in the sanctions over March-levels.

But if a comparison is made on a quarter-to-quarter basis then there has been an improvement, he added. The authorised capital of the bank is proposed to be raised from the current levels of Rs 500 crore to Rs 2,000 crore. The government is expected to increase its contribution to the equity by Rs 500 crore. The bank also proposes to raise Rs 6,000 crore over the next five years.

Desai said while the bill dealing with the government contribution has been cleared by the Lok Sabha, it is awaiting clearance from Rajaya Sabha.