Small exporters worried as loan incentive goes
The Reserve Bank of India’s decision to withdraw 2% interest concession on loans given to exporters has hit small and medium enterprises hard.
By Girish Kuber, ET Bureau |
MUMBAI: The Reserve Bank of India���s decision to withdraw 2% interest concession on loans given to exporters has hit small and medium enterprises hard. There is a growing feeling among them that the government���s efforts are primarily aimed at helping big companies while SMEs and SSIs are left to fend for themselves.
A central bank circular (No DBOD-DIR(EXP).BC 28040201/2008-09) to banks has put an end to the practice of concessional rate of interest to exporters, better known as the interest subvention scheme. The communiqu��, issued by RBI���s department of banking operations and development, has the scheme withdrawn for exporters like textiles, including handloom, jute and carpets, ready-made garments, leather products, handicrafts, engineering products, processed agro products like cashew, coffer and tea, marine products, sports goods, toys, solvent extracted de-oiled cakes and plastics and linoleum. It also mentioned that ���all exporters from the SME sector��� will be excluded from the scheme.
���This means that almost the entire spectrum of small and medium sector has been deprived of the benefit of lower tax,��� an official from the industry ministry said. ���Considering the fact that 72% of India���s exports come from the SME sector, everyone is bound to be affected.���
���Till now, we were getting credit at 10.5%. With the RBI withdrawing this facility, it has gone up to 12.5%. In a way, this rate is at par with the current rate of interest,��� one of the exporters having a unit in Navi Mumbai told ET. Under the current system, banks give pre- and post-shipment loans to exporters at a concessional rate of interests, which was below the prime lending rate of banks. This helped them stay afloat at a time when falling dollar has eroded their margins.
The RBI possibly feels that ���in the changed economic scenario��� the concessional rate of interest may not be a good idea. But the SME sector disagrees. It thinks that the interest concession should continue in the face of a global slump and crashing prices. According to sources, industrial bodies are planning to take up the issue with the finance ministry.
A central bank circular (No DBOD-DIR(EXP).BC 28040201/2008-09) to banks has put an end to the practice of concessional rate of interest to exporters, better known as the interest subvention scheme. The communiqu��, issued by RBI���s department of banking operations and development, has the scheme withdrawn for exporters like textiles, including handloom, jute and carpets, ready-made garments, leather products, handicrafts, engineering products, processed agro products like cashew, coffer and tea, marine products, sports goods, toys, solvent extracted de-oiled cakes and plastics and linoleum. It also mentioned that ���all exporters from the SME sector��� will be excluded from the scheme.
���This means that almost the entire spectrum of small and medium sector has been deprived of the benefit of lower tax,��� an official from the industry ministry said. ���Considering the fact that 72% of India���s exports come from the SME sector, everyone is bound to be affected.���
���Till now, we were getting credit at 10.5%. With the RBI withdrawing this facility, it has gone up to 12.5%. In a way, this rate is at par with the current rate of interest,��� one of the exporters having a unit in Navi Mumbai told ET. Under the current system, banks give pre- and post-shipment loans to exporters at a concessional rate of interests, which was below the prime lending rate of banks. This helped them stay afloat at a time when falling dollar has eroded their margins.
The RBI possibly feels that ���in the changed economic scenario��� the concessional rate of interest may not be a good idea. But the SME sector disagrees. It thinks that the interest concession should continue in the face of a global slump and crashing prices. According to sources, industrial bodies are planning to take up the issue with the finance ministry.
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