The Hindu Business Line : ‘Credit for exporters in foreign currency to be dearer’

Mumbai, Feb 5 The Reserve Bank of India on Thursday announced a host of measures to alleviate the problems faced by banks. Among others, the measures include making credit for exporters in foreign currency dearer by 250 basis points, doubling the ceiling interest rate on the lines of credit with overseas banks by 75 basis points, and extending the time period for restructuring of ‘Standard’ accounts by two months to March 31, 2009.

The central bank, in the light of irregularities and frauds which has taken place under multiple banking arrangements, directed banks to obtain declaration from existing borrowers enjoying sanctioned limits of Rs 5 crore and above regarding the credit facilities enjoyed by them from other banks. Such declaration is also to be sought at the time of granting fresh facilities. It also sought an elaborate system of exchange of information amongst lending banks has been put into place.

In view of the fact that the banks’ costs of raising funds abroad has increased because of which they are finding it difficult to extend credit within this ceiling, the RBI, in consultation with the Government of India, decided to raise the ceiling rate on export credit in foreign currency to LIBOR + 350 basis points with immediate effect subject to the condition that the banks will not levy any other charges, i.e., service charge, management charge, etc. except for recovery towards out-of-pocket expenses incurred.

Similar changes could be effected in interest rates in cases where Euro LIBOR/ Euribor has been used as the benchmark.

Correspondingly, the RBI, said, the ceiling interest rate on the lines of credit with overseas banks has also been increased from 6 months LIBOR/ EURO LIBOR/ EURIBOR + 75 basis points to six months LIBOR/ EURO LIBOR/ EURIBOR + 150 basis points with immediate effect.

On restructuring of advances, the central bank said, it has received representation from banks that due to increased workload, they have not been able to adhere to the January 31, 2009 time schedule. It has, therefore, been decided to extend the time schedule for taking up restructuring to March 31, 2009. All these are one-time measures and would be available for restructuring packages implemented till June 30, 2009. This treatment will be available to all accounts which were standard on September 1, 2008.

In view of the continuing uncertain credit conditions globally; the availability of the forex swap facility to Indian public and private sector banks having overseas operations currently till June 30, 2009, has been extended to till March 31, 2010.

In November 2008, the Reserve Bank of India extended a forex swap facility for tenors up to three months to Indian public and private sector banks having overseas operations in order to provide them flexibility in managing their short term funding requirements at their overseas offices.

More Stories on : Credit Market | Exports & Imports | Forex | RBI & Other Central Banks

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Protecting core entities

PNB implements 100% core banking

VSoft to market cheque-imaging solutions

Tech snag hits bonds trade

‘India unlikely to get access to ADB’s soft loan window’

‘Credit for exporters in foreign currency to be dearer’

‘Agri credit flow seen slowing down’

Call rates end lower

‘Slowdown impacting loan repayment’

Banks to beef up data security measures

RBI widens scope of Ombudsman