NEW DELHI: The Associated Chambers of Commerce and Industry of India (Assocham) has suggested that the bank credit limit to exporters should be increased from 12 to 15 per cent of the total bank credit and also bring exporters under priority sector lending.

In its recently announced credit policy, the Reserve Bank of India had fixed the bank credit ceiling for exporters at 12 per cent, which in view of Assocham is inadequate.

In a memorandum submitted to the RBI, the president, Anil K. Agarwal, said the increased bank credit limit at 15 per cent is deemed necessary as exports have been improving consistently. The growth rate in 2004-05 went up to 20 per cent from 17 per cent in 2003-04 and 15 per cent in 2002-03. The suggested bank credit limit of 15 per cent would further spur the exports in future, he said.

Mr. Agarwal said exporters faced serious impediments in getting adequate and timely export credit from banks, both at the pre and post-shipment stage. They are asked to provide collateral security and personal guarantees, the norms of which are very stringent and create problems for first generation entrepreneurs.

Higher percentage of export credit, he said, would strengthen the country's export efforts and, therefore, the suggested hike in export percentage is urgently called for.

The chamber has emphasised that the RBI and the Indian Bank Association (IBA) should advise the banks not to insist on security so that genuine exporters obtain the required credit. To meet export finance requirements, Assocham has suggested that the RBI should set up a ``Dollar Window,'' adopt a flexible interest rate policy and accord priority treatment to the small and medium enterprises (SMEs) and agri-businesses in keeping with the Budget proposals for fiscal 2005-06. Adoption of a flexible interest rate policy and setting up of a Dollar Window, Mr. Agarwal said, would facilitate disbursement of export credit in foreign currency as also provide larger access of bank finance to the industry, particularly SMEs.

The measures suggested, the chamber said, could be implemented provided the RBI issued directives to all banking institutions to set up dollar windows. In most of the developed economies, the dollar window facility was functional to help exporters in obtaining finance to meet their export obligations. In India, this facility was hardly available and at a time the economy was fast gearing to achieve economies of scale.

The chamber has also suggested the creation of foreign currency assistance for exporters from the existing forex reserves, most of which remain unutilised.

Further, to encourage exports, the pre and post-shipment finance rate, the chamber said, should be around 6.5 per cent and small exporters should be helped to avail of foreign currency loans at Libor rates for which RBI should provide refinance to banks at LIBOR rates.

Assocham has also demanded that export credit should be sanctioned for a three-year term instead of yearly renewals as it would not only lessen the workload of exporters and banks but also reduce transaction costs. Assocham has further suggested that the rate of interest charged by banks from SMEs should be on the basis of profits, track record, risks and future growth of business in relation to cost of funds and the inflation rate and not just on the brand name.

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