Citing the urgent need for turning the country into an export powerhouse and the prevalent practices in competing nations, the Exim Bank has requested the Reserve Bank to increase its leverage ratio so that it can lend more to the exporters.
Currently, RBI allows the Exim Bank to leverage only 10 times of its net-owned funds, which it wants to be hiked to at least 15 times. "We are classified at par with a commercial bank under the RBI guidelines and can lend only 10 times our net owned funds, which restricts our capacity to help exporters," newly-appointed chairman and managing director Yaduvendra Mathur told PTI in an interview. He said his counterpart in China has a leverage of 77.5 times, in Korea it is 30 times, while for Canada's EDC it is 15 times. "We have been requesting RBI to recognise us as a special case of a development finance institution which helps the country's interests," he said, adding it has been requesting for the leverage to be increased to 15 times of the NOF.
At present, the bank has to depend on government infusions to increase its capacity to lend, he said, adding it is expecting an infusion of Rs 1,300 crore this fiscal from the government. "Last year, we got an infusion of Rs 700 crore and there is a headroom of at least Rs 5,000 crore more on the paid-up capital front, after the changes in the relevant Act in 2011 which increased our paid capital to Rs 10,000 crore in phases," he said.
Mathur said the Exim Bank aspires to be "the country's lead development bank for international cooperation" and hence, certain regulatory changes like the hike in the leverage ratio are necessary for this. Exim Bank has evolved from being an institution devoted to export credit, to creating export capabilities and has now risen up the ladder to serve all stages of export business cycle, said Mathur who belongs to a the civil-servant of the Rajasthan cadre. "Now, we want to be the go-to institution for any individual or company which is engaged in foreign trade and we want to compete with the best in the world. This will also help the nation's interests," he said.
He said the bank wants to align its priorities according to the direction set by the government and is now devoting focus on aiding the manufacturing exports, with a special attention on the EPC (engineering, procurement and construction) sector.
Mathur said Exim Bank has also been demanding some relaxation in the single borrower limits, stating that because of the large value of the EPC contracts, it fears exhausting those and not being able to support a worthy company. He also said the government should focus on manufacturing and move away from free trade agreements as that will kill the country's manufacturing competitiveness.