The Hindu Business Line : FIEO concerned over delay in issue of Gold Cards

THE Federation of Indian Export Organisations (FIEO) is concerned over the inordinate delay in issuing Gold Cards to credit-worthy small and medium exporters by banks, especially after RBI had worked out the scheme after discussions with select banks, exporters and the FIEO more than a month ago.

Talking to Business Line from his office in Chennai, Mr Rafeeque Ahmed, President, FIEO, said the scheme was announced in January 2004 with the Exim Policy statement by the then Commerce Minister, Mr Arun Shourie, and the RBI had already cobbled out the scheme.

But it is nearly three months since the last interaction with the apex bank, and nothing has been happening on the banks' front, leaving small and medium exporters worried.

Mr Ahmed said the federation, following a recent interface with RBI, had sought a clear-cut directive to banks in this regard. He said the exporting community was eagerly awaiting the scheme, which envisages additional benefits to exporters based on performance. But till date, nothing much seems to be happening over the issuance of the cards.

Mr Ahmed said credit-worthy exporters with a good track record in the opinion of the individual financing bank would be eligible for the Gold Card. He added that the scheme may not be applicable to exporters who are blacklisted by the Export Credit Guarantee Corporation, included in the RBI's caution list, have been making losses for the past three years or have overdue export bills in excess of 10 per cent of the current year's turnover.

On the fixation of credit limits, the FIEO President said sanction and renewal of limits would be based on a simplified procedure to be decided by the banks. He said the `in principle' limits, as per the scheme, would be sanctioned for a period of three years with a provision for automatic renewal - subject to fulfilment of the terms and conditions of the sanction.

The Gold Card will be issued for a period of three years, and will be automatically renewed for another three years, unless there are adverse features/irregularities in the account.

In case of misuse of the card, or violation of terms and conditions, the banks have the right to recall the card anytime.

Pointing out that banks may determine need-based finance with a liberal approach, Mr Ahmed said the conditions of credit, including interest rate, may be decided by the banks with a softer bias towards gold cardholders.

Under any case, the interest rate will not be more than the general rate for export credit in the respective bank, and will be within the ceiling prescribed by the RBI. It is expected that banks will try to give the best rates possible to gold cardholders on the basis of their rating and performance.

As per RBI guidelines, banks may ensure that the PCFC requirements of gold cardholders are met by giving them priority over non-export borrowers with regard to granting loans against FCNR (B) funds.

The proposed timeframe for disposal of applications for sanction of credit under the scheme may be stipulated as follows:

For fresh applications, it is 25 days, renewal of limits - 15 days and sanction of ad hoc limits - 7 days.

Under the scheme, a stand-by limit may be additionally made available to facilitate urgent credit needs for executing sudden orders.

Mr Ahmed said in case of exporters of seasonal commodities, the peak and off-peak levels may be appropriately specified.

It is suggested that a simplified application form for working capital credit requirements, as devised by IBA, may be adopted by banks with suitable modifications for export credit under the Gold Card Scheme.