The Indian government is all set to turn down the request of the US’s official credit agency, Export-Import Bank of United States (US Exim Bank), to be recognised as a “Financial Institution”. In its application to the Finance Ministry on May 29 last year, the bank said it needed the status as it will give statutory provisions to recover dues against its exposure in India.
In a legal opinion dated January 5, 2013, Solicitor General Mohan Parasaran said, “It may not be the time to grant the status of FI (Financial Institution) upon the US Exim Bank under the SARFAESI (Act).” The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 provides statutory framework only to Financial Institutionsto take over assets in case of default by the borrower.
Earlier, the Reserve Bank of India in separate communications to the Law Ministry and department of banking had said there is “no merit” in the application of the US Exim Bank.
At present, the US Exim Bank has an exposure of $4.5 billion to Indian borrowers, which accounts for 6.11 per cent of its total exposure. The size of non-performing assets (NPA) of the bank is not available, but the legal opinion said its NPA “is almost negligible”.
Highly placed sources said the legal opinion is now under the consideration of Finance Minister P Chidambaram, having been endorsed by Law Minister Kapil Sibal and senior Finance Ministry officials.
The charter of the bank says, “Ex-Im Bank’s mission is to assist in financing the export of U.S. goods and services to international markets. Ex-Im Bank enables U.S. companies — large and small — to turn export opportunities into real sales that help to maintain and create U.S. jobs and contribute to a stronger national economy.”
The RBI, in its communications, had said, “Granting FI status to Exim Bank would not be in alignment with the objectives of the Act as US Exim Bank appears to be interested only in one component of the package, i.e enforcement of security interest without intervention of the court.”
In his legal opinion, Solicitor General Parasaran said, “The US Exim Bank with the primary objective to promote US exports and to promote the welfare of US workers, to seek parity with a multilateral institution as the Asian Development Bank (with several countries as its members with a development objective) is totally misplaced both in law and facts.”
Parasaran also said that officials of Finance Ministry and RBI felt that conferring Financial Institution status to US Exim Bank could trigger similar requests from other Exim banks, which remain entirely unregulated under Indian laws as India does not have a lender’s liability law.
The flow meters are to be installed at Daryapur village, where the Munak Canal enters Delhi.
Best of Express