The Oriental Bank of Commerce (OBC) will be eligible for an additional Rs 900 crore of export credit refinance following the Reserve Bank of India’s policy review announcement on Monday, its Chairman & Managing Director, Mr S.L Bansal, has said.
This will augment liquidity, but will not immediately trigger any reduction in export credit rates. OBC is likely to review its base rate in the first week of July, Mr Bansal added.
OBC’s rupee-based export credit is linked to its base rate, which is now pegged at 10.5 per cent.
“We will wait for the first quarter results and then take a call on the base rate”, Mr Bansal said, adding that he was not disappointed that RBI had not cut policy rates in the latest review. “RBI has taken a cautious approach”, he said.
On Monday, the RBI relaxed the eligibility limit for export credit refinance facility. This was done to further augment liquidity and encourage banks to increase credit flow to the export sector.
The central bank announced that scheduled banks (excluding regional rural banks) will, from the fortnight starting June 30, be eligible for refinancing to the extent of 50 per cent of their outstanding export credit, against 15 per cent earlier.
Benefits mixed
While this move would release liquidity to banks, it would not benefit banks across the board. The benefit would only be bank-specific and will certainly help those with a big export portfolio, Mr V. Kannan, Executive Director, OBC said.
Had the RBI gone in for a cut in cash reserve ratio (CRR), all the banks would have benefited, as any cut would have released funds that could be used to generate income. Currently, funds kept with the RBI as part of the CRR do not earn any interest for banks.
Mr Kannan added that the ECR facility relaxation would be available only for rupee-based export credit and not for foreign currency-based ones that banks give.
krsrivats@thehindu.co.in