REGISTERED No. D. 221
The Gazette of India
EXTRAORDINARY
PART I—Section 1
PUBLISHED BY AUTHORITY
No. 1] NEW DELHI, FRIDAY, JANUARY 3, 1964/PAUSA 13, 1885
MINISTRY OF INTERNATIONAL TRADE
RESOLUTION
New Delhi, the 3rd January 1964
No. 29(1)EXP/63..—The Government of India in the late Ministry of Commerce and Industry (Department of International Trade) appointed on May 31, 1962, a Study Group under the Chairmanship of Shri K. P. Mathrani, Chairman of the Industrial Finance Corporation of India, New Delhi, to review the credit facilities available in the country for developing India's export trade; to determine, in the light of the current and prospective demand for export credit, the measures which would-be necessary to strengthen and supplement the existing financial institutions; and, in particular, to consider:
(1) the institutional arrangements to provide short, medium and long-term export finance on a liberal and wide-spread basis;
(ii) the policy on the concessional rates of Interest and discount chargeable to exporters by various) lending institutions;
(lit) whether it is necessary to set up an 'Export Finance Corporation' or 'Export Credit and Guarantee Corporation'; and
(iv) the steps necessary to achieve the above.
The Study Group submitted its Report to the late Ministry of Commerce and Industry (Department of International Trade) on April 30, 1963.
2. The major recommendations of the Study Group and the decisions of the Government in respect thereof are set out in the Annexure.
3. Government wish to place on record their appreciation of the valuable work done by the Study Group.
ORDER
Ordered that a copy of the Resolution be communicated to all concerned.
Ordered also that the Resolution be published in the Gazette of India for general information.
D. S. JOSHI, Secy.
(1)
2 THE GAZETTE OF INDIA EXTRAORDINARY [PART I-SECJ, rjANNKXURE
SI. No Recommendations of the Study Group Decision of the Govt.
1.
Accepted In principle and will be implement- ed subject to the merits of each case.
Representatives of exporters and Indian banks should be encouraged to explore overseas markets and establish connections with the banking institutions and importing agencies abroad.
2.
Under Consideration The machinery for providing continuous infor- mation regarding the pattern of trade, mar- ket conditions and business links for Indian exporters with buyers abroad should be strengthened.
3.
Accepted.
As the experience of the Export Risks Insurant "• Coii/oration Limited in repaid to ilo pj.L- jng credit policy has been ^atisfaelory, t^t Corporation could raise its guarantee to banks from the present limit of 50% to 663% without incurring undue risk and with con- siderable advantage to exporters.
Ace-pled in principle 4. The Reserve Baifc of India should obtain peiiocheal jn±oniiaU<_m of iiaekn.; V r '••- vanced by banks and exercise its moral suasion with them to IO'IOW a more liberal policy.
5.
Under consideration.
In the cases of mica, mineral ores and handi- crafts, in view of the lack of standardisation and wide price fluctuations, Government should provide suitable preshipment inspec- tion and grading facilities and, ii neei'Siiarv, guarantees to banks against credit on the basis of preshipment Inspection, grading and standardisation of goods.
Accepted In principle. fl. In respect of exports which qualify for incen- tives in the form of import licences, Govern- ment should guarantee to the lendinn institutions amounts up to 79% of the gap between Internal and external prices, the extent of this gap for the purpose of the guarantee scheme being limited in any event to 25% of the F.O.B. value of the Roods exported. On the basis of these guarantees, the lending institutions should increase their loans, wherever they are now related to the lower International prices of the goods, upto reasonable levels. The Reserve Bank of India should give additional borrowing facilities to the banks to enable them to finance the transactions arising from the price gap mentioned above.
7. Some arrangement needs to be made to enable insurance companies to take up the business of giving performance guarantees.
It has not been possible to accept this recom- mendation due to lack of facilities for reassur- ance.
[PART I-SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 3Decision of the Govt. Recommendations of the Study Group
SI. No,
Under examination.
8. A central coordinating agency should be estab- lished for administering? an import-export stabilisation fund on the lines suggested by the Mudaliar Committee, in order to facili- tate the import of essential raw materials necessary for increasing exports.
Under examination.
9. The discount of element of the Sterling bill should have a basic relationship witrr the Bank rate in India. The Reserve Bank of India may fix a ceiling in respect of the discount element of the rupee, sterling and dollar usance bills at such levels as are competitive with sin til T rate's nh ri
LO.
Under examination.
In regard to short term credit for exports, which according to the law as It was recently amended can be granted upto 180 days, the Reserve Bank of India should charge a con- cessional rate of 3%, that is, 1?.% below the Bank rate, on loans to scheduled banks, so that scheduled banks may be enabled to lend money at 4J% to the exporters. These preferential rates are meant to assist mainly exports of non-traditional items, but need not necessarily be limited to such items DW] may be available in the case of o:her dr- •.ving exports also.
11.
Under consideration.
The Refinance Corporation for Industry, Ltd. should try to reduce its rate of interest on loam to the authorised dealers in foreign exchange from 5% to some lower figure so that the rate of interest which is ultimately : barged to the Indian exporter for medium- term periods may not be more than 6% (against 44%) "recommended for short term export finance, vide above paragraph.
12.
Accepted; further action Is being taken to give effect to the recom- mendation.
Further efforts should be made to enlarge the facilities available from the Refinance Cor- poration for Industry Ltd, in order that the resources of that body may be utilised to the extent possible for promotion of exports,
4 THE GAZETTE OF INDIA EXTRAORDINARY [PA.RT I-SEC. I]an. No. Recommendations of the Study Group Decision of the Govt.
IS. An Export Credit and Guarantee Corporation should be set up with the following functions;
Accepted in principle and will be implement- ed by transforming suitably the present Export Risks Insurance Corporation.
(i) to administer the schemes of export risk insurance at present handled by the Ex- port Risks Insurance Corporation Limited;
(ji) to administer the scheme of guarantees whu h may be approved from time to time with a view to remedying the various gaps in the system of export credit in the country;
(iii) to provide such supplementary credit facili- ties as are essential for promotion and development of exports; and
(iv) to perform such other functions as Govern- ment may assign to it from time to time in regard to export credit and guarantees,