Even as India wants to encourage exports including pharmaceutical products to the 'focus countries', the public sector banks continued to play spoilsport for the domestic players by creating non-tariff barriers and categorizing some of the hot export destinations like Kenya as `high risk’ country.
Despite the government’s commitment to look into such indifferent attitude by the banks, another public sector bank – Bank of India—has denied export credit to a pharmaceutical company in Delhi in one of the latest cases to come out and thus once again raking up the issue and forcing the company to seek redressal. Moreover, the bank has chosen to place Kenya, one of the prominent export destinations for domestic pharma industry, in the high risk category. Industry sources claim that there are hundreds of such cases which do not get reported as many play it down as individual and isolated cases.
In a representation to the Commerce Ministry, Delhi-based Pharmchem has claimed that it was denied the export credit by the Chandi Chowk branch of Bank of India. “We received L/C from our client on Habib Bank Ltd for US$ 6,700 on 90 days L/C D/A basis and we accordingly applied to the bank on 12.10.09 for discounting. To our surprise, the branch informed us after 15 days that the authority (head office of Bank of India) has rejected the exposure on Habib Bank Ltd for US$ 6,700 due to “High risk category of the country and volatile international situation,” the letter said.
According to the government sources, it was not the first time that companies have alleged such attitudes from the public sector banks. On complaints with specific details, the respective regional offices of the RBI would look into these cases during the annual financial inspection. As per the mandatory information being filed by public sector banks in the quarterly return to RBI, there are hundreds of employees facing probe for corrupt practices like denying credits, rescheduling or writing off advances.
During the year of 2006, as many as 529 employees were awarded penalties while 22 were convicted. A total of 262 employees were facing prosecution in the court while 592 were under departmental inquiry proceedings. The number of convicted went upto 77 during 2007 and further to 88 during 2008. The number of departmental proceedings also went up 686 during 2008. The number of cases pending in the courts also went up to 268 in 2007 and 273 in 2008, according to the information.
Pharma industry associations have taken up with the authorities several times the issue of such discrimination by the public sector banks especially against the small scale players. However, the attitude did not improve better, according to them. “On one hand the Government is encouraging exports to focus countries as per government of India policy and on the other hand public sector banks are creating non-tariff barriers to discourage exports. Many exporters are losing money and business opportunities. Banks should be instructed to remove such barriers like denial of credit or exposure ceiling on exports,” a leader from the SSI sector said.