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Export Promotion Council for EOUs & SEZ Units
(Ministry of Commerce and Industry, Govt. of India)
705, Bhikaiji Cama Bhawan, Bhikaiji Cama Place, New Delhi-110066
Tel : 011-26167042/ 26165805/26166185 Fax : 011-26165538
Email : epces@vsnl.net

EPCES CIRCULAR NO.9
DATED 27.8.03

L.B. Singhal
Director General

Sub: Nomination of Export Promotion Council for EOUs and SEZ Units(EPCES) in the All India Export Advisory Committee of RBI.

Reserve Bank of India holds biannually All India Export Advisory Committee Meeting for discussing various issues relating to Export Credit, Exchange Control etc. EPCES had requested that it should be nominated as a member in this Committee. I am happy to inform you that RBI vide its letter No.IECDNo.750/04.02.02/2003-04 dated 19.8.03 has informed the EPCES that EPCES has been nominated as a member of the All India Export Advisory Committee of RBI.

We had also taken up with RBI various issues relating to banking sector, as had been received from our members. EPCES had specifically requested that Pre-shipment Credit in Foreign Currency (PCFC) should be made available to EOUs/SEZ Units on priority, Whole Turnover Packing Credit Guarantee Commission should not be passed on by banks to the exporters, Stamp Duty should not be imposed on export DA bills, Transaction Cost for banks should be reduced and accordingly instead of levying "ad valorem" commission, banks should move towards reasonable fixed charge, reducing cost of finance and accepting forward cargo receipt as negotiating document etc.

RBI has examined all the suggestions made by EPCES and has responded positively to some of the suggestions. I am enclosing a copy of letter and a copy of comments received from RBI for your information.

I would like to inform you that RBI is holding next meeting of the All India Export Advisory Committee in Guwahati on September 12, 2003. EPCES has been invited for participation in this meeting. I request you to send to us your issues/suggestions relating to banking sector by Wednesday, September 3, 2003 positively so that we can take up these issues with RBI.

 

RESERVE BANK OF INDIA

Shri L.B. Singhal,
Director General,
Export Promotion Council for EOUs and SEZ Units,
705, Bhikaji Cama Bhavan,
Bhikaji Cama Place,
New Delhi.

Dear Sir,

Issues/suggestions related to Export Credit

Please refer to your letter No.EPC/SEZ/AM/Functl.08/ dated June 4, 2003 on the captioned subject. Our comments on your suggestions on matters related to export credit are furnished in the Annexure.

As regards your suggestion to include you as a member of the All India Export Advisory committee, we are pleased to inform you that we have included the name of your organization in the Committee.

Yours faithfully,

Sd/-

(Y.D. Rao)
General Manager

 

Annexure
Suggestions from EOUs/SEZ Units

Sl.No. Suggestion Comments
Packing credit in foreign currency should be made available to EOUs/SEZ Units. Banks should give priority to exporters particularly to EOUs/SEZ Units in lending foreign currency loan and only after meeting their requirement Foreign Currency Loan (FCL) be provided to domestic units. Sufficient dollar funds must be made available to the banks for this purpose There is no shortage of foreign currency availability in the market for all genuine transactions and investment by Corporates, banks and others. Banks are permitted to arrange lines of credit from overseas banks to augment foreign currency funds for on lending to exporters. As RBI is moving away from micro regulation, extending export credit to concerned entities either in Rupees or in foreign currency is left to banks depending on their business considerations. Making foreign currency funds available to banks from our Forex reserve does not fall in line with the best international practices.
Banks should not charge the premium on WTPCG to the exporters. RBI should decide and differentiate between good accounts and defaulting accounts and give its directions to banks so that the scheme of cross subsidization being run by banks and ECGC can be immediately stopped. At present banks pass on the premium on WTPCG to the exporters. Now ECGC is coming out with new schemes of guarantee whereby selected accounts of banks/branches can be covered by guarantee instead of the Whole Turn Over Packing Credit (WTPCG). In that scheme banks can exclude accounts on which they do not require guarantee. However, this will be left to the discretion of the banks based on their commercial judgement and risk perception of banks.
  Crystallisation of export bills. Being re-examined by FEDAI.
  Stamp duty on export DA bills. Stamp duty is an item to be taken up with Government as it is levied under the Stamp Act of Government. This is being examined by IBA/FEDAI.
  RBI should discontinue the practice of deducting the interest upfront on bills discounted and instead charge interest only on the actual credit availed by the exporters. Interest for the unexpired term of the bill is payable upfront at the time when the bill is discounted/negotiated. This is in line with the international practice.
  High transaction cost instead of levying 'ad valorem' commission in ports and exports, banks should move towards a reasonable fixed charge per transaction, based on the actual administrative cost incurred by them. At present service charges are decided by banks and RBI do not interfere in this matter. However, RBI has advised banks not to view this item as a source of income for increasing profit.
  RBI should advise banks not to insist on tangible security in the case of EOUs/SEZ units. RBI does not interfere with the commercial judgement and risk perception of banks. However, banks have been advised that no worthwhile export proposal should suffer for want of credit vide para 1.3.2(ii)(f) of our Master Circular on Simplification of Procedures.
  Offshore banking units SBI has started an Offshore Banking Unit.
  Interest Rate on rupee packing credit should be reduced. As announced in the Monetary and Credit Policy, interest rate on rupee export credit is being deregulated in a phased manner.
  Long term financial requirements of 100% EOUs in the form of term loan/equipment refinance etc. should be made available in foreign currency at reasonable interest rate on priority. Exporters may take up with banks.
  On renewal of PC limits, banks charge exorbitant processing fees. Such processing fees are to be restricted to reasonable charges. This is left to the banks and exporters should take it up with banks as RBI do not prescribe such rates.
  Adhoc limits to be sanctioned in busy season. As per para 1.2.2 read with 1.3.2(ii)( c ) of our Master Circular on Customer Service, we have advised banks to sanction adhoc limit and peak/non-peak credit facilities to exporters.
  Forward Cargo Receipt Necessary instructions are in place vide paragraph B5 of Section B of our Master Circular EC.CO.PCD.No.29/15.02.70/2002-03 dated January 24, 2003