$8-Bn Export Orders At Risk As Companies Struggle To Get Insurance Cover

Export orders worth $8 billion are at risk as Indian companies are struggling to raise money due to absence of insurance cover.

"We have more than 50 corporates which have secured $8 billion project export orders in 25 countries. While the Indian companies have already secured these orders, we are not able to meet the loan disbursement (demand) as we also need insurance cover," Yaduvendra Mathur, chairman and managing director of Export-Import Bank of India (EXIM Bank), said on Wednesday.

"These orders could reinvigorate the manufacturing process in the country. But if the companies fail to get the insurance cover, they will probably lose those orders," he added. Mathur was speaking to reporters on the sidelines of a banking seminar organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) in Kolkata.

The limited capital base of Export Credit Guarantee Corporation of India (ECGC) has added to the problem. ECGC is a government enterprise that provides export credit insurance facilities to exporters and banks in the country.

"ECGC itself has got a small equity base... Unfortunately, development finance institutions in India has taken a back seat. Our ability to leverage is also small compared to other export-import banks. If both ECGC and EXIM Bank are strengthened we can finance more project exports. The government is aware of this situation and examining this issue closely," Mathur said.

EXIM Bank in India was allowed to lend 10 times its equity base. While the bank wanted to increase this cap to 15 times, the Reserve Bank of India (RBI) has permitted it to lend only 11 times its equity base till March, 2015. Compared to this, export-import bank in China can lend 70 times its equity base while the Korean export-import bank can leverage up to 30 times.

The government has infused Rs 1,300 crore in EXIM Bank during the current financial year taking its total equity base to Rs 5,000 crore. "The authorised equity capital for EXIM Bank is Rs 10,000 crore. Hence, we have requested the government to inject another Rs 5,000 crore in two tranches in the next couple of years," Mathur said.

Project development company

Separately, Mathur said EXIM Bank will partner Infrastructure Leasing & Financial Services (IL&FS), State Bank of India (SBI) and African Development Bank to create a project development company. The proposed joint venture will offer consultancy services to Indian corporates and facilitate exports to Africa.

"We are also talking to Bank of Baroda. Ideally, we want to have five partners with each of us investing $5 million. We have not yet identified a location for the headquarters. But hopefully we will set up this company during the current financial Year.

Source:- business-standard.com