Federation of Indian Export Organistions' (FIEO) exports body on Monday said in a statement that The Reserve Bank of India (RBI) may consider LIBOR plus lending to the micro small and medium enterprise (MSME) export sector besides a rate cut for rupee lending given some moderation in CPI.
Commenting on the forthcoming announcement of the monetary policy review on 1st April prior to the annual policy M Rafeeque Ahmed, President, FIEO said, "RBI could consider a rate cut in the policy given that there is a upsurge in credit and a demand by banks to cut CRR to provide credit to industry," reported by SME Times.
As per the RBI update of 21st march 2014, WPI had settled at 4.7 percent and CPI stood at 8.1 percent, with credit to the commercial sector moderating at 14 percent, he added.
Explaining the MSME export sector problem which is unable to borrow through ECB route easily Ahmed stated that Net foreign exchange assets of banks have grown to 17.3 percent and given that exports have shown a decline of 3.7 percent in USD terms over a year, and rupee is again in a volatile mode, banks could consider providing export credit in foreign currency at LIBOR + rates as against a deregulated regime of export credit in foreign currency announced a couple of years back, it is a good sigh for MSME export sector and would help to borrow through ECB route easily.
Providing foreign currency loans at competitive rates in a scenario of appreciating rupee/ narrowing CAD due to clamp on gold/ and India's exclusion in respect of many important products from the European Union (EU)'s GSP benefits would imply that Indian mineral products like textiles, motor vehicles, bicycles, chemicals etc, he stated.