India has a large access gap to non-recourse export credit

New Delhi: India has a large access gap compared to advanced economies with respect to non-recourse export credit and collateral-free export credit, said Commerce and Industry Minister Piyush Goyal on September 11, an industry official said on Sunday.

ECGC (Export Credit Guarantee Corporation) can play an important role by extending strong insurance cover to banks, which should become a substitute for collateral and other credit risk assessment-related aspects, an exporter said, adding the corporation is already extending insurance cover to mostly public sector banks. “Our request is to increase the coverage to 90 per cent for all sectors, with stipulations on a case-to-case basis,” the exporter added. Further, Sahai suggested the government to popularise the gold card scheme for easy flow of credit to exporters. It was rolled out by the RBI for bona-fide exporters with a proven track record. Such exporters are eligible for in-principle limit sanction for three years with a provision for automatic renewal subject to fulfilment of the terms and conditions of the sanction. “Unfortunately, banks are not encouraging exporters to avail the Gold Card. Banks may be asked to automatically issue gold cards to all eligible customers to extend the benefits flowing from such instruments,” he said.

FIEO president Ashwani Kumar said the government should address issues related to the interest equalisation scheme. Each bank has framed its own rule and applies its own logic to exercise discretion in giving interest equalisation benefit, Kumar said, adding that while the RBI requires banks not to insist on security for export finance, most banks insist on the same. The purpose of interest subvention, as envisaged by the government, is to reduce the cost of interest on the rupee borrowing for export finance, thus encouraging exports, but the banks are interpreting the policies as convenient to them without export promotion being the vision, he said.