Oriental Bank cuts interest rate on rupee export credit

Taking the lead again, Oriental Bank of Commerce (OBC) on Friday slashed the lending rate on rupee export credit by 25 basis points.

The benefit of the reduced rates will be available on all existing and future rupee export credit with effect from July 1, Mr S. L.Bansal, Chairman and Managing Director, OBC, said.

The decision comes close on the heels of the Reserve Bank of India increasing the eligibility limit for export credit refinance.

Simply put, if an exporter was getting rupee export credit from OBC at, say, base rate plus 1.5 percentage points, the same exporter will get these funds at base rate plus 1.25 percentage points from July 1.

The reduction in lending rate on rupee export credit will not affect the margins of the bank, Mr Bansal said. “We expect this (reduced rate) to translate into additional business for us. This is likely to neutralise the loss in interest income,” he told Business Line .

The central bank had on June 18 announced that scheduled banks (excluding regional rural banks) will from the fortnight starting June 30 be eligible for refinance to the extent of 50 per cent of their outstanding export credit against 15 per cent earlier.

OBC has a export loan book of about Rs 5,000 crore, of which, about Rs 2,700 crore is rupee-based export credit.

Mr Bansal said OBC would be eligible for an additional Rs 875 crore of export refinance post the RBI’s mid-quarter policy announcement.

The bank has, therefore, decided to pass on the benefits to exporters and reduced the rupee export credit by 25 basis points, he said.

>krsrivats@thehindu.co.in

COMMENT NOW