To encourage shipments from the country, the Commerce Ministry has suggested the Reserve Bank of India (RBI) to liberalise packing credit scheme for exporters and has urged the apex bank to ensure that small and medium enterprises (SMEs) have access to foreign currency loans from banks for exports, reports media.
In a letter to RBI Governor D Subbarao, Commerce Secretary S R Rao said, "We would ... request that RBI's special export credit refinance to support PCFC (packing credit in foreign currency) (and it) may be enhanced from 50 percent to 100 percent."
The scheme, he said, should be liberalised "to the maximum extent possible through greater refinance margins. It should enhance the overall quantum of refinance available and bring in long term stability to this policy, so as to encourage better export finance planning by both the exporters and concerned banks."
He further said the RBI's special refinance window for PCFC by way of US Dollar-Rupee swap facility has been extremely well received by the exporters and commercial banks.
The SME sector is also needed to be encouraged, Rao said, urging the apex bank to ensure the sector has access to foreign currency loans for exports from Indian banks at a ceiling of LIBOR plus 200 bps.
India's trade deficit widened to USD 20.1 billion in May due to high gold imports while exports declined by over a percent, raising concerns about economic recovery. The deficit gap was at USD 16.9 billion in May last year.
According to latest information, gold imports plunged by over 80 percent in June as government measures including a hike in customs duty tapered demand.
The current account deficit narrowed down to 3.6 percent of GDP in the January-March quarter but totaled a record 4.8 percent for the full 2012-13 fiscal.
