This boost for the credit-strapped export sector comes amid slow global trade growth.
The central bank will also review the threshold for export credit, which is capped at 2% of the total credit forwarded by banks, known as adjusted net bank credit (ANBC), to further ease the flow of credit.
“We propose to remove the turnover condition and enhance the maximum limit to Rs 40 crore,” RBI governor Shaktikanta Das said in a letter to commerce and industry minister Piyush Goyal. ET has seen the letter.
Stating that “only 0.03% utilisation of ANBC is there because of noncapturing of turnover data in the system”, he said the cap of 2% may be reviewed once it is utilised by the banks. As per data compiled by central bank , the balance outstanding for export credit by all commercial banks declined to Rs 2.26 lakh crore on March 31 from Rs 2.43 lakh crore a year ago. It was Rs 1.85 lakh crore on March 31, 2015.
Goyal had told the Rajya Sabha last week that the revised guidelines are expected to release an additional Rs 35,000-68,000 crore export credit under the priority sector. Soon after taking charge of the ministry, he chaired two meetings on the credit squeeze facing exporters.
He emphasised that it was the joint responsibility of banks and the government to ensure that export credit at competitive rates was available to businesses.
“We expect more easing for export financing,” said an official aware of the details.
The Reserve Bank of India could also park funds with overseas branches of Indian banks to give credit at concessional terms.
The relaxation in financing has come amid a slowdown in India’s exports which shrank for the first time in nine months in June as shipments to the key markets of Hong Kong, the United Arab Emirates (UAE) and China declined.
Moreover, global trade is projected to grow at 2.6% this year, a full percentage point below the previous forecast.
Exporters and industry said the easing is piecemeal and not sufficient for a country aiming at $1 trillion of merchandise exports.
“Whatever relaxation comes is welcome but this is a small amount for exporters,” said a leather exporter on condition of anonymity.
“There are certain banks which are close to that limit of 2% ANBC and may not get a huge encouragement from this move,” said the representative of an exporters’ group.
Priority sector lending requires banks to set aside a proportion of their loans to sectors such as farming, small enterprises, housing for the poor and education.