Tirupur Exporters Association has urged finance minister Pranab Mukherjee, to exempt exporters from the base rate model and advise Reserve Bank of India to provide the export credit at a concession rate of 7%.
The proposed implementation of base rate model by the RBI in place of the current benchmark prime lending rate (BPLR) will make the loans dearer for the exporters. With the implementation of the base rate model from July 1, 2010, as being proposed by the apex bank, the concessional export credit facility which is currently available (benchmark prime lending rate – 2.5%) under the BPLR system to exporters will be withdrawn. According to Tirupur Exporters Association president A Sakthivel, even while the concessional facility is given to the exporters in the interest rate, the credit for export is far higher than the international benchmarks. The higher interest rate regime increases the cost of operation and straight away brings down the competitiveness of the exporters in the international markets. With the base rate model the interest rates would only get higher further squeezing the margins of the exporting community.