He said the collateral gives some comfort to bankers while giving finance to exporters, but in terms of recoveries they are not very helpful.
Facing difficulties in making recoveries from exporters, SBI Chairman Rajnish Kumar on Thursday called for changing the way export finances are done and suggested that enhancing the insurance coverage to 90 per cent can help reduce exporters’ cost and boost their business.
“The method of bills or receivables of exporters have to be changed. Our experience has been extremely bad when the associates/subsidiaries are involved, wherein bills are raised and business are directed through associates/subsidiaries,” Kumar told a banking conclave organised by the apex exporters body FIEO.
He also said the collateral gives some comfort to bankers while giving finance to exporters, but in terms of recoveries they are not very helpful.
“There are disputes and long time is taken to realise the collateral. I don’t think it gives you any kind of comfort, which can only come from timely repayment,” he said.
As a wayout, Kumar suggested that enhancing the insurance coverage from the Export Credit Guarantee Corporation of India (ECGC) to 90 per cent can help banks reduce collateral for exporters.
He said bankers have agreed that they will reduce the cost of lending for exporters if the ECGC will increase the cover to 90 per cent.
“If export finance has to be collateral-free then the ECGC coverage has to be enhanced which will help in both reducing the cost and requirement of collateral,” he said.
Kumar also called for extending the interest subvention to all MSME units, irrespective of their target market—serving the domestic market or exports, but added that the discounted rates should be used only at the receivable discounting level.
Urging exporters to develop trust with bankers and the system in general he said, “I always have maintained that one Nirav Modi did not cause a loss of Rs 14,000 crore to one bank, as the damage he did to the system is much higher say Rs 1 lakh crore.”