The charter for US Exim Bank collapsed on 1 July 2015. It is now on the path to closure. What remains of existing Exim Banks in other countries? For instance, India’s own Exim Bank?
Exim Bank India chief thinks it will get more business post closure of its US counterpart:
Will closing down of Exim Bank in the US have any repercussions on operations of Exim Bank in India? Will it make it tough for Indian companies to expand in US markets?
Exim Bank in the US has closed down because there are groups in the US which think that the support that US Exim Bank is giving to some companies, is crony capitalism. But we think that the role of ECAs (export credit agencies) in countries like India and in Asia is immense. In fact, seeing our pattern, many other countries are opening up exim banks. With the US Exim Bank closing down, we would now have more market. Now that competition will go away. Indian companies are going to the US, and we are encouraging them to set up units and factories in the global value chain, so that they can access more developed markets.
Instead of exporting raw materials, we want them to upgrade first in India, and then prepare the final finished good in another country, if they can take advantage of the regional trade treaties that exist, like the Trans-Pacific partnership. One initiative that Exim Bank is supporting is Cambodia, Laos, Vietnam and Myanmar, where we are encouraging Indian companies to go and set up their factories there. From there, they can export to the US and Europe markets.
All such DFIs have always been criticised for this crony capitalism tag. I don’t think India’s Exim bank is free from this criticism. Earlier. all these activities were restricted for these specialised DFIs. Now, banks are increasingly taking up all these activities. Why can’t banks do what Exim Bank is doing as the CEO is suggesting?
It is actually ironical. At a global level, we are seeing new DFIs coming up like AIIB, Brics Bank etc. But their rationale for a country level is declining. IDBI and ICICI have converted to banks a while ago. IDFC is next in line. Though, the blogger thinks IDFC still had a role to play in infra financing given the special role of the sector and inability of banks to fund such long duration projects. However, one is not sure of a special bank for trade finance.