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New credit policy thrills NASSCOM

"This is a remarkable credit policy which allows software companies to operate overseas without the present difficulties of approvals for remittances, opening subsidiaries, and branch offices," K V Ramani, NASSCOM's president, has said.

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"This will facilitate Indian software companies to become truly global players," he added.

According to Ramani, the special provision in the policy with regard to the 'exchange earner's foreign currency' would be especially favourable to the software industry.

(According to the new credit policy, exporters/exchange earners can retain 50 per cent of their exchange earnings in an EEFC account abroad). "Higher EEFC balances will improve business reaction time and reduced interest rates will lead to faster expansion of the industry," Ramani said.

According to software industry analysts, a "minor disappointment" in the policy for the industry is that it does not address the demand that banks should provide software companies with special treatment while financing their working capital requirements.

"While (Reserve Bank of India Governor) Dr Rangarajan has made a mention of the industry's problem in the policy as part of his measures for trade financing, he has not announced any specific measure," one analyst remarked.

In the policy, the RBI governor has asked the boards of the various banks to review their "arrangements for trade financing with a view to enhancing the resources flowing to trade".

"The services sector is gaining in importance. This sector includes activities like tourism, hotels and computer software. The traditional method of assessing of the loan requirement based on the 'current ratio' would not be applicable to such activities," he said in the policy draft.

The RBI has advised banks to devise "alternative methods of assessing loan requirements" of this category of borrowers. "The arrangements made in this regard should be reported in two months," the central bank has instructed.

The RBI is expected to send a special communication on this change to various banks.

- Compiled from the Indian media

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