Tirupur Exporters’ Association (TEA) on Tuesday appealed to the Finance Ministry to provide credit to exporting units of all categories in foreign currency, which it said would help reduce the cost of credit “considerably”.
“The packing credit rates given by Banks to knitwear sector in Tirupur were firming up, being quoted in the range of 10.5-11 per cent.
“The export sector is struggling to cope with the increase and the rate should be brought down to seven per cent,” TEA president A Shaktivel said in a letter to Finance Minister Pranab Mukherjee.
Mr. Shaktivel wrote to the Finance Minister ahead of his review meeting on July 8, with chiefs of public sector banks to take stock of the financial performance and credit flow to the industries.
The banks should also be advised to arrive at a mechanism for keeping a separate chapter for export sector, provide export credit in foreign currency, besides giving a moratorium for a period of one year in payment of interest and principle amount to the knitwear stakeholder units, TEA added.
Shaktivel claimed that after switching over to Base Rate systems in July last, cumulatively, 47 banks have raised their Base Rates by 150-300 basis points during July 2010-May 2011.
Also, the banks have started raising the interest rates after announcement of Mid-Quarter Monetary Policy Review in the middle of this month, he added.
The higher cost of credit is affecting Tirupur knitwear export sector, which is already facing issues after the closure of dyeing units, further to Madras High Court’s order over pollution problem, he said.
The current scenario was not conducive to continue business and the situation warrants a reprieve from banks to sustain in the business and compete in the global markets, TEA said.
After switching over to the Base Rate system from Benchmark Prime Lending Rate system with effect from July last, the base rates of most of the banks ranging between 7.75 and 8.25 per cent were increased by 75-180 basis points, and now the weighted average lending rate in the banking system was 10.5 to 11.5 per cent, Mr. Shaktivel said.