The Federation of Indian Export Organisations (FIEO) has urged the Government and Reserve Bank of India (RBI) to introduce “Export Refinance Scheme” to insulate export credit from the hike in interest rates and increasing global competition coupled with slowdown.
The FIEO, apex body of the Government-recognised Export Promotion Councils, Commodity Boards etc.., has urged exporters to opt for foreign currency denominated credit, which is available at LIBOR+150-200 basis points.
The London Interbank Offered Rate (LIBOR) is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.
A. Sakthivel, President, FIEO, has said that with increasing global competition coupled with slowdown, it is necessary to ensure that increase in export credit rates does not blunt the competitive edge of exporters.
The increase in repo rate is on expected lines to contain rising inflation and flight of capital. However, global trade is passing through a difficult phase because of rising inflation.
The RBI should extend “Export Refinance Facility” to banks. The Government should increase interest subvention under the Interest Equalisation Scheme (IED) from 3 per cent and 2 per cent, respectively, to 5 per cent (to all MSME manufacturers) and 3 per cent (to all other eligible categories) as interest rates have already crossed the pre-Covid level when the Scheme provided for 5 per cent and 3 per cent for subvention.
