Banks audit expected to ensure interest subsidies to exporters.
By Vaibhav Aggarwal
Dec 7, 2009
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Amidst complaints from exporters regarding banks not providing interest subsidies to them, the centre may soon ask for an audit of banks to ensure that they were passing interest rate discounts on loans, as part of stimulus packages, to exporters.

A commerce Department official requesting anonymity said, "We are planning to ask the comptroller and auditor general to carry out an audit of banks to find out on a test check basis whether the subvention amount is getting credited to the account of exporters"

In the last fiscal, an interest rate subvention of 2 percent was announced for exporters in seven identified sectors, as part of government's efforts to help exporters combat the ill effects the global slowdown.

The seven export sectors include textiles, handicrafts, leather, marine products, gems and jewellery, carpets and small and medium enterprises. India's exports declined for 13 months to October 2009. During the April-October period the exports declined by 26 percent.

According to the subvention scheme, banks were allowed to charge interest rates not beyond BPLR minus 4.5 percentage points on pre-shipment credit up to 270 days and post-shipment credit up to 180 days. The interest charged could, however, not be below 7%, the rate applicable to the agriculture sector under priority sector lending.

The department will also see if the RBI could be asked to issue guidelines to banks regarding this. The regulator had already issued a circular in August this year directing banks to adhere to the subvention scheme.

Notwithstanding this, export credit declined in the first few months of the current year. Total Export Credit as a percentage of Net Bank Credit decreased to 4.3 percent at the end of June 2009 from 5.3 percent at the end of September 2008.

The idea behind carrying out the audit is to decipher the extent of the problem.


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