Special secretary, banking, Devi Dayal said the Reserve Bank of India's decision to halve the balance in Export Earners Foreign Currency account was a temporary move and would be reviewed from time to time. The government will, however, consider raising the penalty for EEFC defaulters, he said.
Addressing a seminar organised by the Federation of Indian Export Organisations on Saturday, Dayal said the government would continue with the practice of limited tax on export income.
Concessions on income tax to exporters would continue. The government would advise the central bank to find ways of reducing transaction costs of exporters," the special secretary said.
Earlier, exporters demanded a 20 per cent tax incentive under Section 80-HHC that was withdrawn by the government.
Dayal said the standing committee headed by finance secretary Piyush Mankad would ask RBI to take measures to reduce exporters' transaction costs.
Speaking on the exporters' demand for reduction in the export finance rate, he said the cost of export was linked to the interest rate and other transaction costs. He added that the committee was looking at ways to reduce costs.
RBI issued guidelines for converting 50 per cent of the funds in EEFC accounts into rupees on August 14 to arrest currency depreciation below Rs 46 to a dollar.
RBI chief general manager P K Biswas said, "Considering the market conditions, the objectives of EEFC conversion have been achieved." He said the amount realised so far, estimated by bankers at $850 million, was close to the central bank's target of $1 billion.
Dayal earlier said timely and adequate delivery of credit for exporters was essential, but bankers have been conservative in sanctioning credit to exporters.
He said the instructions to banks to sanction loans up to Rs 5 lakh without collateral has already been issued. "The government may raise the amount beyond Rs 5 lakh depending on the success of the scheme and recovery," Dayal said, adding that collaterals do not really result in realisation.
He said efforts to promote exports had not been satisfactory. In 1993-94, net export credit to net bank credit was 12 per cent which rose to 13.5 per cent in the next fiscal. It, however, decreased to 13.1 per cent in 1995-96 and has been declining every year.
