Here’s how some banks plan to support exporters, but procedural delays play spoilsport

KOLKATA | MUMBAI: State-owned lenders such as State Bank of India and Punjab National Bank working on plans to help exporterswho had hedged their currency exposures with them but were unable to meet their obligations in the middle of Covid-19 outbreak and Lockdown.

They are considering providing short-term unsecured loans to exporters who had sold their expected dollar revenue in the future market but have not received the revenue yet as their shipments are stuck, people familiar with the matter said. Process problems in the middle of closing, first and foremost by getting documents like The status of shipments, delays the process, they said.

Exporters have made a pitch to the government to also allow them to execute the forward contracts without any penalty or extra charge, the people said. the banks are also open to this.

“We have designed bespoke products that facilitate short-term loans for companies that have overseas debt,” said an SBI official, saying on condition of anonymity as he is not authorized to speak to the media. “Based on past items and conditions, we sanction working capital loans with maturities that run over months,” I added.

The bank did not respond to an email seeking comment. A top PNB official ET spoke to said his bank was also considering such a plan.

“Exporters have little opportunity but to seek short-term loans from their banks as goods do not reach their overseas customers amid lockdowns and they face an increased shortage of working capital to pay their wages and costs,” said Abhishek Goenka, the founder by Mumbai-based consulting firm IFA Global.

Under the measures announced by authorities to help businesses affected by the Covid-19 outbreak, all borrowers including exporters are eligible for at least 10% of the working capital limit as emergency financing of banks, a top banker said. RBI has also allowed reassessment of working capital, which may result in additional working capital for borrowers.

“Any cancellation of term deposits booked at around $ 72 will mean huge loss for exporters as the local currency is weakening sharply. Banks should postpone debiting the loss from the working capital limit for 60 to 90 days,” said KN Dey, founder of United Financial, a forex advisory firm. “Instead, a short-term loan will be of great help to exporters across the spectrum.”

But meeting procedural requirements is a problem.

“Although the government has allowed partial reopening of factories, it has not mentioned anything about reopening offices. So the papers are pending, ”said India’s technical export promotion chairman Ravi Sehgal.

According to him, private banks have notified exporters that they would only consider the request for short-term loans when the lockout is withdrawn.

In the meantime, exporters have already begun to approach banks for improved credit.

Knit exporters from Tirupur have approved all the nationalized banks to extend the loan and have it adjusted according to the last booked currency on them. But many of the accounts do not have funds that can be debited and they will automatically turn into default accounts, ”said Raja Shanmugam, president of Tirupur Exporters’ Association.

A weaker rupee is usually good for exporters, but not in the current market as they are uncertain about when they will get their revenue. They have booked the forward contracts at lower exchange rates, but the dollar has now gone over 76 against the rupee. They will suffer because of the exchange rate difference and also in the event that they canceled the forward contracts as the banks would charge a fee for it.

Since early February, when Covid-19 began to spread around the world, the rupee lost more than 7% to close at $ 76.45 on Friday. On April 16, the rupee hit a record low of 76.87 against the greenback.

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