Have sensitised banks, insurance cos to give support to exports via Red Sea: Financial Services Secy

About 80 percent of India's merchandise trade with Europe passes through Red Sea route.

The Union Finance Ministry has sensitised banks and insurance companies towards providing trade finance and insurance support to the exporters trading via the Red Sea, Department of Financial Services (DFS) Secretary said.

“Regarding the Red Sea trade, we have sensitised our banks and insurance companies to take into consideration the issues because the exports have to go through a longer route. If the exporters need trade finance or insurance the banks and insurance companies should deal the case with sensitivity, and not straightjacket it because of change of route. They have to be practical because exporters are taking a longer route. Banks should not create a problem, that sensitisation we have done to banks,” Joshi told Moneycontrol in an interview.

Commerce Secretary Sunil Barthwal is holding a separate meeting this week with stakeholders on the issues faced by exporters in the trade via the Red Sea route, he said.

The Red Sea strait is crucial for 30 percent of global container traffic and 12 percent of global trade. About 80 percent of India's merchandise trade with Europe passes through this route.

ALSO READ: Financial Services Secy says RBI action on Paytm Payments bank in interest of consumers, economy

Red Sea continue to face the threat of attacks which can impact India's trade. The impact of the Suez Canal crisis on Indian exports and imports has been limited so far. However, the cumulative effect of higher freight costs, increased insurance premiums, and extended transit times could significantly raise the cost of imported goods.

India's exports in December 2023 entered positive territory, registering a growth of 0.96 percent compared to the same month the previous year, following a contraction in the preceding months. January onwards, exports may be impacted due to the situation unfolding in the Red Sea.

Recently on February 5, DFS secretary Joshi separately took a meeting with banks to provide them clarity and comfort on supporting exports happening via countries which are under sanctions.

“In some cases of trade, there may be difficulty in getting the needed documents because exports going through countries which are under sanctions. Banks face difficulty and need comfort and clarity from regulator to support and finance such exports,” Joshi added.