New Delhi: The RBI's decision to increase the export credit refinance limit to 50% of the outstanding rupee export credit for banks will help infuse much-needed liquidity and benefit the small and medium enterprises (SMEs), Tata Steel Group Chief Financial Officer Koushik Chatterjee said Monday.
"The SMEs depend significantly on large corporations and large projects and large revenue share on services and so on. They are certainly driven by liquidity because higher level of credit and cheaper credit helps them in their working capital cycle. It helps them in putting up projects which piggy rides on large projects and so on," Chatterjee told CNBC TV-18 in an interview.
Earlier Monday, the RBI increased the export credit refinance limit for scheduled commercial banks to 50% of the outstanding export credit from 15% now, in a bid to inject further liquidity and encourage banks to bolster credit flow to the export sector.
SME is the most sensitive segment in the organized economy and SMEs as well as distributors and retailers would certainly be affected if liquidity is not available, Chatterjee said, adding that banks have become risk averse and this is resulting in pressure on SMEs.
"The most affected part is actually the SME and the bank credit to them should certainly increase because they are a very important part of the value chain as far as the economy is concerned," he added.
Chatterjee further said that it is currently difficult to predict when capital expenditure will begin picking up for India Inc.
India's gross fixed capital formation, or investment rate, was at 29.5% of gross domestic product (GDP) at current prices for fiscal 2011-12, falling below 30% for the first time since 2004-05.
"It's very difficult to predict when the capital expenditure cycle will kick off because people will put in money when there are clarity on the ground. They believe that the risks of putting capital is low or is under control and therefore, clarity on several policy issues, reforms on policy fronts are critical," he added.