The cabinet also approved a scheme for the proposed amalgamation of Bank of Baroda (BoB), Vijaya Bank and Dena Bank to create the country’s second-largest public sector lender (after SBI).
The Cabinet Committee on Economic Affairs (CCEA) on Wednesday decided to extend a 3% interest subsidy for hundreds of items produced by labour-intensive sectors like agriculture, textiles and leather that also make up for a sizeable chunk of MSMEs.
“The proposal will entail benefits of around Rs 600 crore to exporters on interest equalisation for the remaining period of the scheme,” the government said in a statement.
The cabinet also approved a scheme for the proposed amalgamation of Bank of Baroda (BoB), Vijaya Bank and Dena Bank to create the country’s second-largest public sector lender (after SBI). The amalgamation will take off from April 1. As per the scheme, the businesses, assets and liabilities of Vijaya Bank and Dena Bank will be transferred to BoB.
Separately, the Cabinet cleared a proposal to amend the Trade Unions Act, 1926 for making provisions regarding recognition of trade unions.
The Act currently provides for only registration of trade unions. However, the recognition of trade union is governed by guidelines in the ‘Code of Discipline’ evolved in 1958, voluntarily accepted by employers and employees. The explicit recognition is crucial, as recognised trade unions will likely have more bargaining power with employers.
Apart from creating jobs, the sops for exporters are aimed at improving credit flow to the target exporters and boost outbound shipments that have been hovering around $300 billion a year since 2011-12 without substantial growth.
The CCEA approved the commerce ministry proposal to include merchant exporters in the interest equalisation scheme for pre-and-post shipment rupee export credit by allowing them interest equalisation rate of 3% on such credit for export of products covered under 416 tariff lines (products), according to the government statement.
These products are largely in MSME/labour-intensive sectors such as agriculture, textiles, leather, handicraft and machinery.
Inclusion of merchant exporters in the scheme is expected to make the exporters more competitive, encourage them to export more products manufactured by MSMEs.
Earlier this year, commerce minister Suresh Prabhu had flagged the issue of a plunge in export credit. He had suggested that loans to exporters should be considered priority sector lending by the banks.
Federation of Indian Export Organisations (FIEO) president Ganesh Kumar Gupta hailed the move. “Merchant exporters contribute to about 35% of country’s exports and high cost of credit equally blunts their competitive edge.” The subsidy will significantly reduce the cost of operation of merchant exporters, who play a key role in shipping out items produced by MSMEs.
The country’s merchandise exports grew by 11.6% in the April-November period to $217.5 billion. The outbound shipments grew around 10% in the last fiscal to $303 billion, albeit on a low base.
Separately, BoB on Wednesday finalised the share swap ratio for merger of Vijaya Bank and Dena Bank with itself. As per the plan, shareholders of Vijaya Bank will get 402 equity shares of BoB for every 1,000 shares held. As for Dena Bank, its shareholders will get 110 shares for every 1,000 shares of BoB.
The government in September last year had announced the amalgamation of these banks.