Oriental Bank hails RBI move on export credit refinance

Oriental Bank of Commerce (OBC) will be eligible for an additional Rs 900 crore of export credit refinance post the RBI’s policy review announcement on Monday, its Chairman & Managing Director, Mr S.L. Bansal, has said.

This additional refinance eligibility will augment the liquidity of the bank, but not immediately trigger any reduction in export credit rates. OBC is likely to review its base rate in the first week of July, Mr Bansal said.

Base rate

OBC’s rupee-based export credit is linked to its base rate, which is now pegged at 10.5 per cent.

“We will wait for the first quarter results to be available and then take a call on the base rate,’’ Mr Bansal said, adding that he was not disappointed that RBI had not cut policy rates in the latest review. “RBI has taken a cautious approach’’.

ECR eligibility limit

The RBI on Monday relaxed the eligibility limit for export credit refinance (ECR) facility. This was done to further augment liquidity and encourage banks to increase credit flow to the export sector.

The central bank announced that scheduled banks (excluding RRBs) will from the fortnight starting June 30 be eligible for refinancing to the extent of 50 per cent of their outstanding export credit against 15 per cent earlier.

While this move would release liquidity to banks, it would not benefit all banks across the board. The benefit would only be bank specific and certainly help those with a big export portfolio, Mr V. Kannan, Executive Director, OBC, said.

CRR cut

Had the RBI gone in for a cut in cash reserve ratio, all the banks would have benefitted.

Any cut would have released funds that could be used to generate income for the banks. Currently, funds kept with the RBI as part of CRR do not earn any interest for the banks.

Mr Kannan also said that the ECR facility relaxation would be available only for rupee-based export credit and not for the foreign currency based export credit given by banks.