NEW DELHI: With representatives of both the gems and jewellery segment and the larger exporter segment reporting a virtual drying up of short-term credit post the unearthing of the PNB-Nirav Modi scam, the Federation of Indian Exports Organisations’ (FIEO) is asking the banking industry to avoid knee-jerk reactions.
Pointing out that the trade community was completely on the same page with the government vis-a-vis compliance and plugging any loopholes, Ajay Sahai, Director General and CEO of FIEO told Express that this should not lead to knee-jerk reactions where credit for all exporters is strained or delayed.
“Bona-fide exporters are already compliant with procedures. Traders will not mind if they look into the procedures closely, if these are detailed on a public domain, and cases are decided in a timely manner. But we should not use these kind of opportunities to delay or stop payments,” Sahai said.
The export industry is finally beginning to latch on to the global and domestic recovery of growth, and Sahai pointed out that this was the time the industry needed a hand. Sahai also linked the steady fall rupee values on the currency markets over the last few days to the drying up of credit.
“The rupee is falling because people are being forced to buy forex on the spot market to meet their commitments. This is a bad situation. Exporters already face a tight situation as far as liquidity is concerned,” he said.
While the government’s declared numbers show a steady erosion in the amount of refunds stuck in both IGST and the drawback funds, the industry’s estimates of actually processed refunds are much more pessimistic.
“I’ve been given to understand that only roughly 20 per cent of the IGST has been refunded and the number for ITC is around 1-2 per cent. This has affected working capital badly and if credit dries, them it will become worse,” Sahai said, adding, that the industry was on the same page on banks plugging loopholes.
“But, let us not compound the compliance burden on exporters because bankers want to save their skin,” he concluded.