Govt weighs option of liberalising export credit

NEW DELHI: More goodies for exporters are on the cards. The government is considering liberalising export credit and this could come as an announcement in the interim-budget to be tabled by the finance minister Jaswant Singh on Tuesday.
Exporters, who have been pushing for a reduction in transaction costs to compete in the international markets, were given a slew of sops only last week. The concessions, announced by the commerce minister Arun Jaitely in his mini-exim policy, included bringing gold and silver under open general licence and making imported raw materials cheaper and easily accessible.
Finance minister Jaswant Singh may now hold out a promise to further liberalise export credit, since exporters have also been pushing for cheaper and easy access to credit. Mr Jaitely had in an interview to ET last week said that his ministry could have done much more on export credit if it had more time. A further lowering of the interest rate on export credit is one of the options being looked into by the finance ministry.
Currently, banks charge an interest rate which is 2.5% lower than the prime lending rate (PLR) on pre-shipment credit up to 180 days. However, beyond 180 days and up to 270 days, banks are “free� to charge interest rates decided by them keeping in view the PLR and the spread guidelines.
On post-shipment credit, the interest rate on bills up to 90 days is 2.5% below prime lending rate. However, banks are “free� to charge interest rates beyond 90 days and up to six months from the date of shipment.

The Reserve Bank of India has been encouraging banks to have a customer-friendly export credit delivery system. In the mid term review of ’02, it was indicated that interest rates on post shipment beyond 90 days and up to 180 days would be deregulated from May 1, ’03.
However, in the April ’03 credit policy, a decision was taken to continue extending refinance facility to eligible export credit remaining outstanding under post-shipment rupee credit beyond 90 days and up to 180 days.