Finmin tells PSBs not to stop loans for shipments via Iran

Written by SunnyVerma | Kirtika Suneja | New Delhi | Updated: Jul 27 2012, 07:07am hrs
The finance ministry has directed the public sector banks (PSBs) to continue providing loans and banking facilities to exporters, whose shipments are passing through the ports of Iran for onward shipment to other countries. This move is intended to prevent the newly imposed US sanctions on Iran from impacting country's trade as a lot of exporters use Iranian ports as transit point for onward movement of goods to the markets in the Middle East and CIS countries.

Except the state-owned Uco Bank, other PSBs cannot do business with Iranian companies, or with Indian companies having commercial dealings with Iran, as a fallout of sanctions imposed by the US on Iran. But PSBs have also been denying credit facilities to even those exporters who use the Iran ports such as Bandar Abbas as a transit point. The department of financial services has directed banks to provide seamless credit services and other facilities to such exporters, official sources said. Exporters use Iran as a transit point for sending shipments to many other countries such as Afghanistan.

The move assumes importance because exports of tea, coffee, textiles, spices and leather to the West Asia routed through Iran countries were getting affected adversely. Though the US sanctions are meant for Iran only but banks have been reluctant in giving letters of credit (LoCs) to traders whose shipments are routed through Iran. A few banks have been reluctant in opening letters of credit to such traders. Hence, commodities other than agriculture, pharma and medical equipment- which are not a part of the US-EU sanctions- have been hit, said Ajay Sahai, director general and CEO, Federation of Indian Export Organisations (FIEO). Exporters said Iranian ports are major transit points for Indian exports, and banks' refusal to provide banking services to shipments passing via Bandar Abbas have affected their operations in recent months. The government operationalised rupee payments to Iran via state-owned Uco Bank after the US imposed international financial and trade sanctions on due to its clandestine nuclear programme. The RBI allowed Iran's central bank to open rupee accounts with UCO Bank.

According to the Apparel Export Promotion Council (AEPC), small traders in the apparel industry have been hit but the big traders have not been denied loans. "The apparel industry has not been hit so much but many times to avoid duty, shipments are routed via Dubai and not much is transited at Iranian ports. Hence, it is not a big problem for most of the textile exporters, said A Sakthivel, chairman, AEPC.