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January 6, 1998

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Banks have been asked to evolve separate guidelines for lending to the software industry since it is a thrust area for export promotion.

The union commerce ministry has told banks that since software industry is less capital intensive but needs more working capital it should not be treated on par with other industries.

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A different set of lending norms for the industry has been suggested as part of a range of measures to boost exports from the electronics and software sector.

The ministry has conducted a meeting of bank chiefs under the chairmanship of Union Commerce Secretary P P Prabhu so that financing problems of the software industry could be thrashed out.

Reportedly, there is general consensus on evolving some fresh mechanism for funding the software business.

"We had a fruitful discussion on the lending issue and the matter is being followed up," said R H Naqvi, executive director of the Electronics and Software Export Promotion Council.

"We hope that some of the problems we face in sourcing working capital requirement will be sorted out soon," he said.

The meeting also took up the issue of venture capital and enlistment of shares of electronics companies on foreign stock exchanges.

"The need for venture capital is felt because some of our small exporters have been facing problems in sourcing funds from banks," Naqvi said.

Exporters had complained to the ministry that the stringent guarantee conditions stipulated by banks were a big hindrance to sourcing loans for growth.

They had asked for some streamlining among banks when it comes to asking for guarantees from exporters so that there is a prudent set of norms on the issue.

The commerce ministry, on its part, had brought the issue to the notice of the Reserve Bank of India.

The need for a selective approach to loans for the software industry was felt when the ministry was chalking out a medium-term export strategy. However, the strategy was never made public because elections were called and the announcement would be in violation of the Election Commission's rules.

The electronics and software industry has been identified as one of the new generation export products. The commerce ministry has also constituted a taskforce to evolve a criterion to identify thrust items based on the existing strengths and weaknesses of the industry.

In a bid to make the electronics and software industry more competitive it has been proposed to do away with many administrative requirements.

- Compiled from the Indian media

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