The Hindu Business Line : RBI panel for hike in foreign currency export credit rates

THE Reserve Bank of India's (RBI) Working Group to review export credit has recommended that the interest rate for foreign currency denominated export credit be increased by 0.25 percentage points.

However, it has also suggested that the rupee export credit rate remain unchanged in the interest of small and medium exporters.

The Working Group has suggested that the interest rates may be raised by 0.25 percentage points (London Inter Bank offered rate plus one percentage point for the first slab and additional two percentage points for the second slab) subject to the condition that banks may not levy any other charges in any manner under any name including service charge.

The group has also asked banks to extend export credit at rates lower than the ceiling rates prescribed by the RBI.

"Since the RBI prescribes ceiling rates and banks are at liberty to charge lesser rates of interest, taking into account the cost of funds, margin requirements, risk perception, etc., banks should try to extend export credit at rates lesser than the ceiling rates prescribed by the Reserve Bank," the group said in its report, which was released today.

The Working Group to review export credit was set up in April 2005 under the Chairmanship of Mr Anand Sinha, Chief General Manager-in-Charge, Department of Banking Operations and Development, Mumbai.

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