The Hindu : Tamil Nadu News : Strong rupee will benefit all in the long run: expert

Online edition of India's National Newspaper
Wednesday, Jun 27, 2007
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Tamil Nadu

Tamil Nadu

Strong rupee will benefit all in the long run: expert

Special Correspondent

CHENNAI: At a time when textile exporters are crying over the strong rupee, Sundaram Clayton Ltd vice-president (Finance) K. Sukumar has described it as a ‘hype’ rather than a reality, saying it would benefit everyone in the long run.

Addressing the members of the Southern India Chamber of Commerce and Industry (SICCI) on the ‘recent trends in international finance: volatility in currency,’ here on Tuesday he said that when the local currency gained strength over the U.S. dollar, it reduced trade surplus. Unfortunately, it was reverse in India and it created deficit. Our imports were more. “Moreover, we are not into hedging in a big way.” “The auto components industry stands to gain from a strong rupee. IT and software firms might lose some money in the short term. The textile exporters and others have to renegotiate the price with their buyers. The IT firms will find an alternative. We have to import the raw material instead of sourcing it locally,” he said.

Ramesh Ganesan, senior vice-president, Head of Transaction Banking, ABN Amro Bank, Mumbai, explained how the technology was changing the way corporates finalised their financial transactions. “We are slowly moving away from the Real Time Gross Settlement (RTGS) to the National Electronics Funds Transfer (NEFT). In the next few months, Electronics Fund Transfer (EFT) will become thing of the past, and we are slowly getting into Cheque Truncation System. It took nearly two years for the RBI to cover 30,000 branches through the RTGS, but in the last few months, 26,000 branches have got hooked on to the NEFT. Unlike the RTGS, it is efficient, and settlements can be netted and completed in batches. It does not have last-mile connectivity problem.”

Settlement cycle

According to Mr Ganesan, corporates could reap huge benefits from the Cheque Truncated System that would reduce the settlement cycle for cheque realisation, reduce cost and improve services.

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