The Union Cabinet approved capital infusion of Rs 6,000 crore in state-owned Exim Bank to enable it support export credit. The fund infusion will be done through issuance of recapitalisation bonds, on the lines similar bonds being issued for capital infusion in public sector banks. The equity will be infused in two tranches of Rs 4,500 crore in 2018-19 and Rs 1,500 crore in 2019-20, respectively. Fund infusion is being done to augment its capital adequacy and to enable it to support Indian exports.
“The infusion will give an impetus to anticipate new initiatives like supporting Indian textile industries, likely changes in Concessional Finance Scheme, likelihood of new LoCs (Lines of Credit) in future in view of India’s active foreign policy and strategic intent,” the government said. Regulated by the RBI, Exim Bank lends to exporters and supports overseas buyers and Indian suppliers for export of developmental and infrastructure projects, equipment, goods and services from India. The Centre also approved an increase in the bank’s authorised capital from Rs 10,000 crore to Rs 20,000 crore.
Infusion of equity through issuance of recapitalisation bonds will enable the government to keep its fiscal deficit under check, since only interest on these bonds need to be recognised in the budget.
Exim Bank was not given any funds during Rs 2.11 lakh crore capital infusion programme in October 2017 which was for public sector banks. The Budget 2018-19 had allocated Rs 500 crore equity infusion for Exim Bank, which was infused last July.