Falling Re pushes up cost of raising funds: Exim Bank chief

The lack of direction in corporate investment strategies is leading to a rise in bad loans of banks, feels T.C.A. Ranganathan, Chairman and Managing Director, Export Import Bank of India.

“There is something wrong, somewhere. It’s time for a complete internal reorientation (for the industry),” Ranganathan said while addressing a seminar on growth opportunities for the Indian banking industry organised by FICCI.

According to him, there is a need for increasing production capacity and focussing on investment in research and development. Currently, R&D expenditure in India stands at 0.85 per cent of GDP. Use of technology in manufacturing should be another important area of focus, he said. On devaluation, he said a free fall of the rupee against the US dollar has impacted the Exim Bank “indirectly” as the cost of raising funds has gone up.

“Rupee depreciation is impacting us indirectly. Cost of raising funds is going up. The bonds market has frozen. But, at the moment, Exim Bank has enough liquidity,” he said.

He pointed out that decline in the value of rupee would not hit the Bank directly, since “60 per cent of its balance sheet is foreign currency (dollar) denominated”.

Exim Bank currently has 168 lines of credit across more than 73 countries in Africa, Latin America, Europe, Oceania and the CIS, with a credit commitment totalling more than $8.69 billion to finance exports from India.

While there is “slight easing” in Europe on project exports, situations are stable Africa and Latin American countries, according to him. He added that fresh contracts in West Asia have come down.

ayan.pramanik@thehindu.co.in

Source: thehindubusinessline