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INDIA BUSINESS WORLD - November 16th December 31st 2008
EXIM BANK GETS REFINANCE PUSH FROM RBI
TROUBLED exporters will now be able to avail fresh lines of credit from the Export Import Bank of India, with the Reserve Bank of India (RBI) deciding to provide refinance worth Rs 5,000 crore to the financier.
The credit market crunch had made it difficult for Exim Bank to raise foreign currency funds to support exporters. By tapping RBI’s refinance window, the bank will be able to disburse foreign currency lines of credit to exporters. Exim Bank will use the rupee funds provided by RBI and swap them for dollars. It will then disburse the lines of credit guaranteed by the government to exporters.
The refinance provided by the central bank will be at the repo rate—6.5%—for a period of up to 90 days up to March 2010. Exim Bank executive director N Shankar said: “The liquidity support is for the government-guaranteed lines of credit that have been sanctioned. We are availing of this liquidity support to make disbursements against sanctioned loans. Hence, there will be no implication on the cost of lending.”
SINCE the lines of credit are in foreign currency and the liquidity facility is in rupees, we will take the rupee funds and swap them for dollars as and when required,” said Exim Bank executive director N Shankar.
RBI had recently announced a Rs 4,000-crore refinance facility for the NHB to boost home sales. RBI governor D Subbarao promised further support for the economy through more monetary stimuli if the situation warranted. “The economic situation in India is uncertain like the global economy. It’s not possible to calibrate a roadmap now. The current situation demands action on both the monetary and fiscal sides. Going forward, RBI will do whatever is appropriate,” Mr Subbarao said after the central board meeting in Kolkata. The credit support to NHB is expected to further ease interest rates on housing loans. NHB is contemplating reducing its refinance rates which are close to 11-12% annually. This means housing finance companies would get refinance at cheaper rates from NHB and they can pass on the benefits to the borrowers.
NHB chairman & managing director S Sridhar confirmed the bank would offer funds to housing finance companies at lower rates. “The extent of rate reduction would be decided at the board meeting after examining the detailed guidelines from RBI,” he said. The biggest beneficiary of the Rs 4,000-crore credit support to NHB would perhaps be Housing Development Finance Corporation by virtue of being the largest housing finance player in the country. Its vice-chairman & managing director Keki Mistry said: “Normally, we keep some liquid cash with us. Under this facility, we would be allowed to borrow money at a short notice and then we would not need to keep any liquid cash with us. However, we can’t use this facility for lending as it would create an asset-liability mismatch.”
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