FIEO Urges RBI to Extend Export Credit Tenure to 450 Days Following 25 Bps Repo Rate Hike

The Federation of Indian Export Organisations (FIEO) has formally approached the Reserve Bank of India (RBI), requesting an extension of the tenure for pre-shipment and post-shipment export credit from the current 270 days to 450 days. The appeal follows the central bank’s decision to hike the benchmark repo rate by 25 basis points to 5.50% and shift its monetary policy stance to calibrated tightening to counter emerging inflationary pressures.

FIEO highlighted that while the rate adjustment aims to rein in domestic inflation, the resulting increase in financing costs risks severely straining the operational viability of Indian exporters, particularly micro, small, and medium enterprises (MSMEs).

Widening Working Capital Cycles

FIEO President S C Ralhan stated that while the central bank's objective of safeguarding price stability is understandable, monetary policy tightening must not squeeze working capital liquidity for export businesses. Exporters are facing severe global bottlenecks that have elongated payment and logistics timelines.

According to the export body, outbound shipments face compounded pressure from:

• Prolonged transit times and maritime route disruptions that have sharply raised logistics schedules.
• Delays in the realization of export proceeds from overseas buyers contending with global economic softness.
• Elevated raw material and energy prices driven by geopolitical tensions, which inflate initial capital requirements.

Ralhan noted that widening cash-conversion cycles mean the traditional 270-day window for concessional export finance is no longer sufficient. Extending credit limits to 450 days would offer domestic exporters much-needed headroom to fulfil international purchase orders without incurring penalty rates or defaulting on financing covenants.

Macroeconomic Context and Industry Pressures

The pressure on exporters emerges despite broader strength in India's macroeconomic indicators. The domestic economy recorded a Gross Domestic Product (GDP) growth rate of 7.8% in the first quarter of FY27, backed by resilient performance in services and merchandise trade. However, FIEO warned that Indian exporters operating on narrow profit margins risk losing price competitiveness to regional peers if borrowing costs harden further in an environment of tightened bank liquidity.

Beyond the extension of credit tenures, FIEO has urged the banking regulator and the government to deploy targeted liquidity support mechanisms and ensure adequate availability of affordable export finance under existing interest equalization frameworks. Such policy buffers, the apex body noted, will be essential to sustain outbound trade momentum as global demand remains choppy.

Tags: Reserve Bank of India FIEO Export Sector MSMEs Monetary Policy Committee