RBI conserving its forex reserves
03 Dec 2008
The Reserve Bank of India is preserving its depleted foreign exchange reserves and hs been turning down lending requests from banks and FIIs.
It recently refused to entertain a request by Export-Import Bank of India (Exim Bank) for a direct dollar credit line to meet its lending commitments.
Exim Bank, usually relies on funds raised overseas, but with the credit crisis griping the global economy, Exim has found that this source of funding has become increasingly difficult to tap. Fores reserves have been falling steadily in dollar terms as the dollar has strenght by 20 per cent from 39 to 50 to a dollar.
With this sharp fall, forex reserves stood at $245,799 million as on 28 November 2008. The forex kitty has been depleting for the last few months with FIIs resorting to heavy selling in the equity market and the RBI trying to save the falling rupee through aggressive selling of dollars in the currency market.
Exim looking for sources of borrowing
Earlier this year Exim bank's chairman and managing director T C Venkat Subramanian had said that they plan to raise Rs170 billion this year, out of which $1.8 billion (Rs72 billion) will be foreign currency borrowing. Last fiscal, the bank raised Rs.140 billion through debt both from overseas and Indian markets and the bank disbursed Rs270 billion.
Since RBI refusal to extend a direct dollar credit line, Exim bank has been scouting for other sources of financing. It has also requested RBI to extend its borrowing limit from the European Investment Bank by $50 million to be avail up to $150 million from EIB.
Exporters in a quandary Exports declined by over 12 per cent in October, while imports grew by more than ten per cent, widening further the trade deficit. Exports from labour-intensive sectors have witnessed a sharp decline over the last seven months with tea going down by 20 per cent, handicrafts by 70 per cent, carpets by 32 per cent, oil meals by 50 per cent, man-made yarn by 17 per cent, cotton yarn by 19 per cent and marine products by 19 per cent, figures collated by the Federation of Indian Export Organisations.
The Reserve Bank of India (RBI) has announced some measures for liquidity management and improving credit flow by doubling the period of entitlement of the first slab of post-shipment rupee export credit to 180 days with effect from 1 December 2008. The commerce ministry is said to be in discussions and a major booster tor package for the exporters is expected soon.
