Exim Bank to Expand Into Cluster Financing

Exim Bank to expand into cluster financing The Hindu Business Line: July 07, 2010

Export-Import Bank of India is eyeing ‘cluster financing' as a new line of business even as it renews its focus on providing buyers' credit to improve exports from the country.

The Government-owned financial institution is seeking to play the role of a catalyst so that export-oriented units in clusters benefit from pooling of resources in areas such as procurement of raw materials, storage of raw materials, intermediates and finished products, and export marketing.

“We want to expand into cluster financing. We are undertaking studies on how to go about this line of business,” said Mr Prabhakar Dalal, Executive Director, Exim Bank.

To take its cluster financing initiative forward, the bank will zero-in on clusters specialising in pharmaceuticals, chemicals, food processing, and leather that require export credit.

In clusters where there is good scope for financing exporters, the bank may consider setting up offices. Else, its existing offices could expand their outreach to service these clusters. There are more than 200 clusters across the country, said Mr Dalal. On giving a renewed thrust to buyers' credit, he said this would encourage more exports as exporters can be assured that credit risk is not on them.

“Buyers' credit will help exporters focus on expanding their business as we take care of the credit risk arising from an importer. We do a thorough due diligence of a buyer's credit worthiness and country risk assessment before extending such a facility,” said Mr Dalal.

The bank also plans to strengthen its focus on country/export destination research to gain in-depth knowledge of the kind of products or projects that can be exported from India, the sectors in which Indian investment would be useful, who are the other investors/competitors in that country, and what are the interest rates charged by local banks. This information will be useful not only to the bank, but also to exporters and policy-makers.

To support the new initiatives and strengthen its workforce, Exim Bank plans to recruit about 30 specialist officers — engineers, accountants, economists, and experienced bankers — in the next six months.

“There are many MBAs and CAs working with us. We start them off on higher positions to begin with. At a very young age they get international exposure. They are given adequate responsibility and are eligible for fast-track promotions,” said Mr Dalal.