Mumbai: The Federation of Indian Exporters Organisation (Fieo) on Thursday said the RBI circular ordering exporters to sell-off half of their dollars in the market will impact their margins in these bad times and called for selective lifting of the ban. (Agencies)
While welcoming the Reserve Bank's move to prop up the sagging rupee, Fieo President M Rafeeque Ahmed said the move will badly affect the payment flexibility of exporters particularly those in the gems & jewellery, petroleum, electronic goods, plastic products, chemicals space.
"Therefore, the RBI must increase the cap for electronics, plastics and chemicals exporters to 75 percent, while allow 100 percent holding for petroleum and gems & jewellery exporters, as the move will limit the exporters payment flexibility," Ahmed said.
Ahmed, however, clarified that Fieo supports the RBI order asking exporters to access forex market only after fully utilising the balance in the EEFC account.
Earlier in the day, RBI ordered exporters to convert half of their dollars in the exchange earner's foreign currency account (EEFC) into the rupee. The move came a day after the domestic currency hit a lifetime low of 53.82 against the US dollar.
Sectors remitting commission or royalty may also feel the pinch as they may have to buy dollars from market increasing the cost, he pointed.
He also said the move will increase forex conversion charges, impacting fast dwindling export margins in these trying times and pointed out that already MSME exporters have been complaining that some banks are converting forex at card rate rather than inter-bank rate (market rate) and as a result of which a differential of 30- 40 paisa per dollar is lost.
He said RBI move comes within a week of deregulating foreign currency loans to exporters, who are increasingly exposed to the high cost rupee window for export credit which is above 12 percent whereas competitors offer interest rates as low as 4-5 percent, denting the country's edge in the export markets.
Mumbai: The Federation of Indian Exporters Organisation (Fieo) on Thursday said the RBI circular ordering exporters to sell-off half of their dollars in the market will impact their margins in these bad times and called for selective lifting of the ban.