New Delhi: The Reserve Bank plans to include export finance under priority sector lending category, with certain riders, Deputy Governor HR Khan said in Gandhinagar on Tuesday.
He said that a specially constituted internal group is working on this aspect and its inclusion would be over and above benefits granted to financing Micro, Small and Medium Enterprises (MSMEs). A decision on this aspect is expected in the final report, which is scheduled to be submitted in two months.
"One of the suggestions which this group is looking at now is whether up to a particular level of export advance limit, and linked with some turnover of that party, whether there can be incremental amount which can be computed for the purpose of priority sector lending," Khan said He was speaking at an interactive meeting with exporters on the sidelines of the final day of the Vibrant Gujarat Summit.
Khan said this is a re-alignment exercise within the overall priority sector lending limit, which now stands at 40%. Under priority sector lending, lenders have to devote 40% of their overall credit to help prop up sectors like agriculture and small scale sector.
At a bankers' meet earlier this month in Pune, it was decided to review priority sector lending targets since the needs and requirements of the economy have changed with time. The RBI had constituted an internal working group to suggest changes in priority sector lending norms much earlier.
"Internally, we are discussing with stakeholders. We will also discuss with the government and come out with our guidelines on including to what extent and what form exports will find place in the new priority sector lending guidelines," Khan said.
Khan said the RBI is monitoring a dip in the share of exports, and added that there is a need for state-level banking committees to look into this aspect and suggest corrective steps. He said the RBI is looking to further liberalise and simplify trading in exchange traded derivatives as well.
"Now we are considering further relaxation of limits of exchange-traded derivatives like currency futures, in which we had allowed up to US $10 million without any documentation. We may consider increasing the amount, increasing dollar-rupee play and may also simplify documentation requirements," Khan said.
He asked banks to be transparent while pushing products and services to exporters, some of which may be complex, and ensure that there are no hidden charges anywhere. He said that in some instances, it was found that frontline staff were lacking and not very well versed with client requirements, he said.
The RBI has asked banks to compulsorily train such staff, including certifications, he said, indicating that some penal action may be initiated against authorised dealer licences for not working as per expectations. He came down heavily on currency trading by some exporters, saying they should concentrate on their core business rather than place bets in money markets which could hurt them later.
"Small and medium businesses should focus on their business, rather than punting in the currency markets," Khan said, clarifying that RBI appreciates hedging against receivables for an exporter but strongly discourages trading. Khan said that in a few months, a trade receivables discounting system would be in place and added that there are certain challenges in this area due to which the RBI has informed the government to make certain amendments in the Factoring Act for smoother functioning.
Talking about overall exports, Khan said that at a time when the global economy is slowing down, the key challenge is to meet the ambitious export target.