The Hindu Business Line : FIEO wants `dollar window' to boost exports

IN a bid to further rev up exports which are now on the upswing, the Federation of Indian Export Organisations (FIEO), Eastern Region, has urged the Reserve Bank of India to open a "dollar window" which would take care of the requirements of subsidised export credit in foreign currency.

The FIEO has also suggested that in order to make the Gold Card Scheme more effective, cardholders may be allowed to open a bank account anywhere in the world in the correspondent bank of the Indian exporter's bank concerned. It is felt that amounts can be routed through Indian banks, if so required. The FIEO has also sought waiver of stamp duty charged on usance bills, uniformly by banks on slab basis all over the country. It was suggested that such levies on usance bills had no legal significance and only added to the already high transaction costs, which continue to burden the exporters.

Stressing on the need for imparting greater flexibility in the exchange earners' foreign currency (EEFC) account, especially when Indian exporters are now staring at a zero tax incentive scenario, Mr S.K. Jain, Chairman, FIEO, ER, has pointed out that banks should first meet the foreign currency needs of exporters before extending the FCNR loans to corporates which are not exporting.

He suggested that Indian exporters may be allowed to place their EEFC funds on interest bearing investments.

In a recent interactive session with Mr O.N. Singh, Alternate Chairman, Indian Banks Association (IBA), and other senior banking officials such as Mr H.N. Sinor, Chief Executive, IBA, and Mr B.K. Dutta, ED, UCO Bank, the FIEO has suggested that special attention be given to the credit needs of small and marginal sectors which account for nearly 65 per cent of India's exports.

According to Mr Jain, dollar loans in the form of pre-shipment credit in foreign currency (PCFC) are not made easily available, and as per bankers, this was on account of paucity of dollars. He said in some cases, banks are willing to provide loans but add on the cost of inter-bank borrowings.

Pointing out that the RBI has already provided for PCFC to Indian exporters at Libor plus 0.75 per cent, Mr Jain suggested that banks may provide such credit to exporters at rates specified by the apex bank and absorb all costs of raising of such funds.

The RBI, he felt, could lend or make available the necessary foreign exchange free to bankers against loans granted as PCFC. He said export credit should be kept outside the purview of the Tandon Committee and/or Kannan Committee norms, where an equity to debt ratio of 1:2 was suggested.

Suggesting that the system of collaterals and guarantees adopted by banks needs to be reviewed, the FIEO urged the banks to be a little more liberal in their approach, as the export bill itself was a collateral.

According to the Federation, for sectors such as handicrafts and handmade articles which need low-cost plant and machinery, low-cost inventory and support a higher labour component, the existing criteria for collateral needs to be modified.

This, it is stated, would not only encourage the small and medium exporters but also help expand employment opportunities for skilled and semi-skilled artisans/labourers.

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