The government announced reduction of both pre-shipment and post-shipment credit by 2 percentage points to 9 per cent, on par with the present central-bank refinance rate. "RBI should maintain the 2 per cent margin available earlier," said a banker.

The expectation of a 7 per cent refinance offer originates from the assumption that the new announcement is a corrective measure on the failed central-bank attempt of June, 11 to offer 6.5 per cent concessional credit to incremental exports this year. At that time, the Reserve Bank had offered a refinance rate of 4 per cent, which had ensured a 2.5 per cent spread for banks.

Meanwhile, someexporter associations have dubbed the announcements as a "damp squib". "The changes announced are trivial and not in the area of creative policy initiatives required for kick-starting exports," All India Importers' & Exporters' Association president Mahan Nihalani said.

Even if the central bank announces a 7 per cent refinance, as is widely expected, the banks will still stand to lose. At present, banks are not availing of the Reserve Bank's refinance window owing to excess liquidity with them. With the lowering of the export credit rate to 9 per cent, it will no more be feasible for banks to lend from their own funds. The banks will be forced to avail of the refinance window in order to lend at 9 per cent said a banker.

He, however, said that banks can still avoid tapping the refinance window at least for the time being owing to the present low call rates. Only if the call rates shoot up to above unviable levels, the banks need to tap on the re-finance window. The banks have the freedom to tap there-finance window based on their preceding months' export credit.

Most of the large banks have about 11-12 per cent of their total credit in the export-finance segment. This has not been growing due to the negative growth in exports reported this year. "Let there be growth in exports. Then we shall talk about financing it. At present there is no shortage of finance," a senior bank official said.

The Wednesday's announcement by the centre is seen as a `refurbished' version of the June 11 announcement made by the Reserve Bank. The central bank had announced a concessional export credit at 6.5 per cent to incremental exports over and above the export value achieved by a company in 1997-98.

The central bank was, however, forced to call off the measure on July 18, a little over a month after the announcement, following protests from the bankers and exporters regarding the impracticality of the measures. They had said that it is difficult to calculate the incremental growth on exports and it is easy forcompanies to manipulate the incremental export figures by floating new companies. The present concessional interest rate at 9 per cent is applicable for all exports.