To safeguard exporters from rupee fluctuations the Reserve Bank of India (RBI) Wednesday asked banks to review the export credit limit on a regular basis to help exporters.
"We have examined the issue and banks are advised that they may compute the overall export credit limits of the borrowers on an on-going basis say monthly based on the prevalent position of current assets, current liabilities and exchange rates and re-allocate limit towards export credit in foreign currency, as per the bank's own policy," said a notification issued by RBI.
|
|
>
This may result in increasing or decreasing the rupee equivalent of foreign currency component of export credit, it said.
The rupee has depreciated over 20 percent against the dollar since May. It has been trading at 63 level after hitting its life-time low of 68.85 in August-end, reports media.
While thanking the Reserve bank of India for issuing a notification on re-evaluation of export credit limits in foreign currency, President, Federation of Federation of Indian Export Organisations (FIEO), M Rafeeque Ahmed stated that the fluctuation of rupee had impacted borrowings in foreign currency adversely and as a result of the same revaluation at a higher value in terms of Indian Rupees resulted in the exporter being asked to reduce their exposure by part payment or where the export credit limit is not fully disbursed/ commensurate reduction in the available limit depriving exporter of funds.
He said that RBI's suggested option which would go well with the export sector is to denominate foreign currency (FC) component of export credit in foreign currency only so as to completely insulate exporter from rupee fluctuations and save banks the trouble of monitoring/re- allocating limits towards export credit in foreign currency on a periodic basis or monthly basis.
FIEO chief stated that with the new notification in place computation of the overall export credit limits of the borrowers on an on-going basis which could be monthly has been suggested to banks so that they re-allocate limit towards export credit in foreign currency, thereby increasing or decreasing the Indian Rupee equivalent of foreign currency component of export credit.
"The apprehension that one of the fall-outs of such periodic assessment could also be service charge levy by banks adding to existing roster of levies such causing additional cost burden," he added.
