Page 37 - Banking Finance December 2016

ARTICLE

A way Forward to Banks: invoice to duty drawback, done digitally. Any how the ex-
ports are feeling a sigh of relief by the interest equaliza-
ICICI Bank MD and CEO Chandra Kochhar has expressed her
tion scheme commenced by GOI for the next five years.
views on free trade pacts saying that there should be
"greater thinking" while signing FTAs (Free Trade Agree-
Therefore, in view of such external factors, a slight adjust-
ments) as they have yielded more benefits to India's part-
ment in exchange rate could serve as an effective instru-
ner countries. On analyzing the export performance dur-
ment to address challenges emanating from relative price
ing the years 2005-12, the FTAs that have been signed with
competitiveness and can help India's exports. Exchange
various countries, our imports from those countries have
rate management alone will not relieve India's export chal-
grown more than our exports have grown.
lenges. The country should make continuous efforts in alle-
So, actually our partner countries have benefited more viating supply-side bottlenecks to boost sectoral productiv-
from us. So while signing the FTAs India should concentrate ity and export competitiveness.
on our competitive sectors like services and more weightage
should be given to those sectors to protect our interests. Therefore, India should adopt a progressive approach to-
India has so far implemented FTAs with countries like Ja- wards structural reforms to address cyclical as well as struc-
pan, South Korea, Singapore and ASEAN. It is negotiating tural factors at the external and internal fronts, which are
several such pacts with nations like the EU, Australia and adversely affecting our export performance. In addition we
New Zealand. have to be selectively thoughtful about our benefits while
finalizing any trade agreement with other countries so that
The entire world is slowing down both for exports and im- market and product differentiation may help us in attain-
ports. India needs to make its exports more competitive ing a sustainable export growth in line with our core com-
amid slowing global demand and depreciating currencies. petencies and ongoing reforms.
We have to pick up some sectors where we can make India
the global hub in the entire value chain and the most im- Most of the factors discussed above are beyond the con-
portant sector to pick up should be electronics as it being trol of banks; despite they should shift their focus to the
the second largest imported goods in India, if we can just financing to more SME units and help them in developing
take one of these sectors as champion sector. We will ac- into independent export units as most of them at present
tually produce in the country for consumption in India to supply to the parent exporters who reap the benefits from
start with later of course exports and create huge amount the trade.
of employment.
There lies a huge opportunity in SME segment as these units
Suggesting steps on financing for exports, the entire export constitute more than 40 % of the India's export manufac-
credit line in India is still much smaller in terms of scale turing. Banks should also focus on new market segmenta-
compared to many other exporting countries. Considering tion and shift their area of finance to the sectors and coun-
the availability of cheap export credit, today even the pre- tries which are aligned to the new Foreign Trade Policy
shipment credit has entire obligations of SLR and CRR which 2015-20. Small and Medium Enterprises are not companies
add to cost of that credit. So if we can even have pre-ship- which have access to international funds at cheap rates.
ment credit qualify for non-application of CRR and SLR, the
cost of funding for the exporters could be much lower. There are some sectors like automobiles in which Indian
SMEs produce at least one or more components. Banks can
By making the entire export credit part of priority sector also extend their support to the SME exporters for the time
lending can incentivise banks to provide more export credit. being by making cheap export credit available to them and
Today all the export credit that foreign banks do, it quali- offering concessions in service charges particularly to SME
fies for priority sector classification but the funding of ex- units which have been striving hard to make a mark in the
port credit that Indian banks do does not qualify for it. international arena and are initially not in a position to
There is a need to make the entire exercise, right from negotiate with the banks. T

BANKING FINANCE | DECEMBER | 2016 | 37

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