India Exim to promote trade with Eastern Europe

Indian exporters look to the export-import bank of India for comfort when exporting to Eastern Europe.
The export-import bank of India (Exim bank) will confirm export letters of credit from pre-approved banks in the Former Soviet Union (FSU) and Central and Eastern Europe (CEE) countries through a new programme between the Exim bank and the European Bank for Reconstruction and Development (EBRD). The arrangement aims to boost Indian exports to a region considered to be high-risk.

The Export Credit Loan Arrangement Technique (ECLAT) sees the Exim Bank confirming and guaranteeing letters of credit, issued by 30 banks in FSU and CEE, including the American Bank of Albania, the International Bank of Azerbaijan Republic and the Bank of Georgia. The importer's bank will seek confirmation of the letter of credit from the Exim Bank, and the beneficiary of the letter of credit, the Indian exporter, is then able to negotiate export finance from a commercial bank on the strength of the Exim Bank's confirmation and guarantee.

"The potential for trade between India and the Eastern European counties is substantial," says Arvind Sonmale, deputy general manager of the Exim bank of India. In 1998-1999, India's exports to the CEE and FSU countries amounted to over US$1 billion, with Russia, Poland, Kazakhstan, Hungary, and the Ukraine the top five importers of Indian goods. "But it has been observed that many Eastern European counties have a high country risk rating, and Indian companies wanting to export to these countries desire the comfort of a letter of credit confirmed by an international or an Indian Bank," comments Sonmale on the catalyst behind the recent agreement.

Sonmale added that the EBRD perceived difficulties in arranging co-financing with tied export credits in state sector projects in CEE and FSU countries where international competitive bidding is required. Under the ECLAT agreement, the Exim Bank can now access information on various projects and trades that are financed by EBRD, thereby speeding up the confirmation process. Under the agreement, the fees payable by Indian exporters for the confirmation of such letters of credit will be in line with the domestic pricing structures in India and will be passed on by the Indian exporter to the importer.

The Exim Bank of India has had a structured relationship with the EBRD since 1995, when the two banks signed a Memorandum of Understanding for the co-operation and consultation on matters of selection of operations, appraisal and processing, exchange of information and consultation.

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