Here’s how some banks plan to support exporters, but procedural delays play spoilsport

KOLKATA | MUMBAI: Government-owned lenders such as State Bank of India and Punjab National Bank are working on plans to help exporters, who had hedged their foreign currency exposures with them but are unable to meet their obligations amid the Covid-19 outbreak and lockdown.

They are considering giving short-term unsecured loans to exporters who had sold their anticipated dollar proceeds in the forward market, but haven’t received the revenue yet as their consignments are stuck, people familiar with the matter said. However, procedural hassles amid the lockdown, primarily in getting documents such as on the status of consignments, are delaying the process, they said.

Exporters have made a pitch to the government to also allow them to rollover the forward contracts without any penalty or extra charge, the people said. The banks are open to this as well.

“We have designed bespoke products that facilitate short-term loans to companies having overseas payables,” an SBI official said, speaking on the condition of anonymity as he is not authorised to talk to the media. “Based on past records and relationships, we are sanctioning working capital loans with maturities running into months,” he added.

The bank didn’t respond to an email seeking comment. A top PNB official ET spoke to said his bank was also considering such a plan.

“Exporters have little options but to seek short-term loans from their banks as goods are not reaching their overseas clients amid lockdowns and they are facing increased shortage of working capital to pay their wages and overheads,” said Abhishek Goenka, the founder of Mumbai-based advisory firm IFA Global.

As per the measures announced by the authorities to help businesses hit by the Covid-19 outbreak, all borrowers including exporters are eligible for an at least 10% of working capital limit as emergency finance by banks, a top banker said. The RBI has also allowed reassessment of working capital, which may result in additional working capital to borrowers.

“Any cancellation of forward covers which are booked at around 72 a dollar means massive loss for exporters as the local currency has depreciated sharply. Banks should defer debiting the loss from working capital limit by 60 to 90 days,” said KN Dey, founder of United Financial, a forex advisory firm. “Instead, a short-term loan will be of much help for exporters across the spectrum.”

But meeting the procedural requirements is a problem.

“Although the government has allowed partial reopening of factories, it has not mentioned anything about reopening of offices. So, the paperwork is pending,” Engineering Export Promotion Council of India chairman Ravi Sehgal said.

According to him, private banks have communicated to exporters that they would consider the request for short-term loans only when the lockdown is withdrawn.

Meanwhile, exporters have already started approaching banks to get enhanced credit.

“Knitwear exporters from Tirupur have approached all the nationalised banks to expand the loan and get it adjusted on the forex last booked on them. But many of the accounts do not have funds which can be debited and automatically they will turn defaulter accounts,” said Raja Shanmugam, president, Tirupur Exporters’ Association.

A weaker rupee is usually good for exporters, but not in the current market as they are unsure when they would get their revenue. They have booked the forward contracts at lower exchange rates, but the dollar has now gone above 76 against the rupee. They would suffer because of the exchange rate differential and also in case they cancelled the forward contracts as the banks would charge a fee for that.

Since the beginning of February, when Covid-19 started to spread worldwide, the rupee lost more than 7% to close at 76.45 a dollar on Friday. On April 16, the rupee hit a record low at 76.87 against the greenback.