Exim Bank package for software firms

MUMBAI, July 24: The Export Import Bank of India on Friday announced a concessional finance scheme for software product development apart...

MUMBAI, July 24: The Export Import Bank of India on Friday announced a concessional finance scheme for software product development apart from a host other measures to promote software service and exports. Exim Bank managing director YB Desai said that the institution will offer credit at half the bank8217;s minimum lending rate MLR for new product development.

At the current MLR of 14 per cent, Exim Bank finance for product development in software will be at 7 per cent, which is lower than the average cost of Exim Bank8217;s funds at nearly 10 per cent. The loan will be product-specific, and the concessional part of the credit will have to be repaid to the bank should the product be successful. Desai said that loans will be extended only to established companies that can convince the bank about the viability of the new product.

This is the first time Exim Bank is offering software product development finance, which is considered highly risky because of the high rate of obsolesence in product development. Tillnow, most of its exposure to software sector was for financing of exports and professional services.

The bank has targeted about Rs 25 crore to be disbursed under this head this fiscal, and has earmarked Rs 2 crore for meeting the interest differential between MLR and the concessional interest rate. The scheme will cover import of software tools, encryption technologies, hardware for product development, attributable manpower costs, specialised skills up-gradation, beta testing expenditure and other allied costs.

Exim Bank has also earmarked Rs 12 to be given as grant fror promoting software exports. Under this scheme Exim Bank will grant up to 50 per cent of expenditure for developing or enhancing its entry in a new market. This could include participation in international IT fairs and other similiar events, preparation of quality promotional material for overseas marketing etc.