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Exim Bank chief cautions against equity dilution

Export-Import Bank of India,the body set up by the government for the purpose of financing,facilitating and

Written by George Mathew | Mumbai | Published: July 8, 2013 2:20:20 am

Export-Import Bank of India,the body set up by the government for the purpose of financing,facilitating and promoting India’s foreign trade,will lose its acceptability in a third country and its borrowing costs will increase if the government’s stake in the bank gets diluted,the bank’s chairman and managing director TCA Ranganathan said.

“Exim Bank of any country loses its acceptability if its not 100 per cent government owned. This is because the third country must accept it. The US Exim Bank is 100 per cent government owned. Exim Banks in China,Canada,UK etc are all government owned. Otherwise,they will lose recognition and acceptability,” he said referring to demand from a section of big project exporters on investing in the equity of Exim Bank.

“Today my borrowing cost is 40-50 bps cheaper than State Bank of India. That is because we are 100 per cent government owned,” Ranganathan told The Indian

Express in an interview.

“Under the present setup,I keep getting capital and I keep making profit. So far it has proved all right. We have a large current account deficit problem too. Some project exporters feel if the capital base is expanded,it can grow bigger. What we tell them is that if they get orders,let them get it and if there is a problem,we can solve it. If they get orders and we are unable to finance them,then I am sure the government will step in,” he added.

Ranganathan stressed that Exim Bank has not refused sanction to anyone on account of a lack of capital. “We have managed it so far successfully. If anyone comes with a $1 billion order,I am ready to support it provided the counterparty risk is taken care of. Last year we got Rs 500 crore capital. That is fine,” he said.

He,however admitted that there were inherent constraints under which the bank has to function and that poses a challenge for exporters.

“Under the norms which the company is monitored by the RBI,I can grow my balance sheet only ten times of our net owned funds (capital and reserves). The challenge is that my peers in other countries are not regulated in the same manner. If Indian exporters have to compete with them,that’s a challenge,” Ranganathan said.

The bank gives annual assistance of Rs 25,000 crore. The outstandings grow by about Rs 8,000-10,000 crore per year. “Whatever structure is there it’s because of historical evolution. You can’t wish it away,” he said.

“If orders get manifested and there is enough supply of book contracts,then I can tell the government I need it (funds) for these contracts. Until they come with those contracts… you can’t go to the government and say if they come with contracts,I will need capital,” he said.

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