Add'l subvention, priority status may aid exporters: OBC

The government's decision to increase the export subvention rate from 2 percent to 3 percent will be an incentive for exporters, says SL Bansal, CMD of Oriental Bank of Commerce. However, banks will benefit from these steps only when RBI certifies export credit to be as part priority sector, he told CNBC-TV18.

It will help the bank to offer this credit at much cheaper price. The banks will also be benefitted if term loans are also included in the export credit category, he adds. Also read: Export sops: Interest subvention raised from 2% to 3% Below is the edited transcript of his interview to CNBC-TV18. Q: Is subvention attractive enough option for bankers to lend to exporters and the fact that it has been increased to 3 percent will make you more open to lending to exporters you think? A: I object to your statement that bankers will be motivated. As it is, bankers are more than willing to lend to the exporters, but there should be a viable proposal. This 1 percent additional subvention will make exporters happy in the sense they will be seeing that viability improve. Yesterday, when we were in the policy meet, we discussed these issues. From our side we raised two major issues with Reserve Bank of India (RBI). Firstly, is part of export credit can be certified as priority sector? So that will help the bank in offering this credit at a cheaper price. As on date, most of the banks are struggling to achieve priority sector targets. Secondly, what we have requested RBI is since China is vacating space and already they have over capacities, it will be worthwhile if you can consider financing of this term loan to the exporter as a part of export credit. That will be more helpful for the bank. Q: At the moment, term loans are not classified as export credit? A: Exactly. Suppose somebody is putting up a factory and he avails X amount of term loan from me, it is not part of export credit. Q: This subvention itself you hope will increase the number of exporters coming to you; your due diligence will find them more viable? A: Exactly, because it is our function. In today’s environment, if one percent interest is provided upfront to the exporters, then his viability improves. Q: There has been an increase also in number of sectors; the entire MSME sector has been now included. Would there be any point in terms of increasing the number of people who can avail this benefit? A: Absolutely. We have not seen that because Commerce Minister was talking to the people just 15 minutes back and you have started grilling me at the same moment. Let me apply my mind. But it will improve the disbursement.