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April 30, 2002 | 1210 IST
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Cautious approach, says Fieo

BS Corporate Bureau

The Federation of Indian Export Organisations felt the approach of the Reserve Bank of India in the Monetary and Credit Policy has been one of extreme caution.

S K Saraf, vice president, FIEO, said that, while the RBI had understood the need to impart greater flexibility to the interest rate structure in India, its approach has been one of extreme caution.

"This is clear from the interest rate structure where the ceiling rate on export credit and foreign currency is being reduced to LIBOR plus 0.75 per cent from the existing LIBOR plus 1 per cent," he said.

In the case of rupee credit, the interest rate had been rationalised in April 2001 where, for post- and pre-shipment credit, rates were linked to the prime lending rate.

These continue at the prevailing rates of 2.5 percentage points below PLR, which has been extended up to September 30, 2002.

Although there has been a reduction in the rate of interest for rupee credit below PLR, most banks are charging varying rates of interest depending on their individual PLR.

"In this situation there is no uniformity which I feel needs to be brought about if we are to be competitive in the international market," said Saraf.

Saraf added that some positive developments in the policy have been the inclusion of pre and post shipment credit facilities for deemed exporters, which had been one of the long-pending demands of the federation. This will help ancillary suppliers to EOUs/EPZs units in the special economic zones.

Besides, this requirement of collaterals has been dispensed with for the small-scale sector up to Rs 500,000 and banks have been asked to increase the limits of dispensation of collateral requirement for loans from the existing 500,000 to 1.5 million for those units with a good track record.

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