EXIM Bank Current Affairs - 2019
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The Reserve Bank has come out with a new policy for overseas borrowings. The RBI has rationalized the earlier policy in consultation with the Government of India.
Features of the New Overseas Borrowing Policy
The features of the new policy are:
- The new policy allows all eligible borrowers to raise External Commercial Borrowings (ECB) up to $750 million or equivalent per financial year under the automatic route replacing the existing sector wise limits.
- To liberalise the framework ECB and rupee-denominated bonds Tracks I and II under the existing framework are merged as ‘Foreign Currency denominated ECB’ and Track III and Rupee Denominated Bonds framework are combined as ‘Rupee Denominated ECB’ to replace the current four-tiered structure (Track I, II and III denotes amount and maturity of funds raised).
- All-in cost ceiling per annum has been pegged at the benchmark rate plus 450 bps spread.
- The minimum average maturity period (MAMP) has been kept at three years for all ECBs, irrespective of the amount of borrowing except the borrowers specifically permitted in the circular to borrow for a shorter period.
- The list of eligible borrowers has been expanded to include all entities eligible to receive foreign direct investment (FDI).
- The new policy allows port trusts, units in SEZ, SIDBI, EXIM Bank, registered entities engaged in micro-finance activities, registered societies/trusts/ cooperatives and non-government organisations to borrow.
- Negative list for which the ECB proceeds cannot be utilised includes real estate activities, investment in the capital market, equity investment, working capital purposes except foreign equity holder, repayment of Rupee loans for except foreign equity holder.
The recent changes that have been brought out in the ECB policy are likely to help wider set of eligible borrowers i.e. corporates and other entities to avail ECBs to meet their capital needs with the Uniform Minimum Average Maturity Period requirements, uniform all-in-cost ceilings and small negative end-user list.
The Union Cabinet headed by Prime Minister Narendra Modi has approved a capital infusion of Rs 6,000 crore in state-owned Export-Import Bank of India (Exim) to expand its business.
How the capital infusion would be made?
Key facts about the capital infusion proposal are:
- The government would issue recapitalisation bonds to the tune of Rs 6,000 crore for capital infusion of Exim Bank.
- The capital infusion would take place in two tranches of Rs 4,500 crore in 2018-19 and Rs 1,500 crore in 2019-20 respectively.
- The government has also approved an increase in the bank’s authorised capital from Rs 10,000 crore to Rs 20,000 crore.
Authorised capital refers to the maximum amount of capital for which shares can be issued by a company. The Authorised capital would be mentioned in the Memorandum of Association of the Company and can be increased at any time in future.
The capital infusion and increase in authorised capital give an impetus to new initiatives such as supporting Indian textile industries, likely changes in the Concessional Finance Scheme, likelihood of new letters of credit in future in view of the country’s active foreign policy and strategic intent. This will have a positive impact on increasing the exports of India.
Export-Import Bank of India (Exim Bank)
Exim Bank is a premier export finance institution of India. It was established in 1982 under the Export-Import Bank of India Act to promote the Indian exports. Exim Bank assists the Industries across wide avenues like import of technology, export product development, export production, export marketing, pre-shipment and post-shipment and overseas investment.