“These are initial discussions, and various models, including setting up a council like the Financial Stability Development Council (FSDC), are being looked at,” said an official.
The commerce department is also studying institutional mechanisms of other countries to examine if exim policymaking, which is currently under various departments and other bodies, can converge. Set up in 2010, FSDC, which has representation from all sectoral regulators, deals with issues relating to financial stability, financial sector development, inter-regulatory coordination, financial literacy, financial inclusion, and macro prudential supervision of the economy, including the functioning of large financial conglomerates.
Besides exporters and importers, the trade finance ecosystem includes banks, customs, freight forwarders, and insurers, among others, which fall under various agencies such as the Directorate General of Foreign Trade, the Reserve Bank of India, and the Department of Financial Services and are governed by the Foreign Exchange Management Act and the Foreign Trade Policy, among others. “A lot of decisions are taken in different bodies of government, and we are doing a study to see whether policymaking can converge,” said another official, requesting anonymity, adding that a final decision will be taken after the review is completed.
The impact of regulations by the RBI and the Insurance Regulatory and Development Authority of India in trade finance and trade credit insurance, and the roles of institutions such as EXIM Bank, Export Credit Guarantee Corporation and commercial and public sector banks would be examined as part of the review exercise. Integrating trade finance activities under one umbrella can provide a more coordinated and centralised approach to trade finance regulation and policymaking, officials said. “This can enable the government to address the gaps and barriers in the trade finance ecosystem and align trade finance policies with objectives,” said a trade expert.
The new convergence body could help deal with issues faced in the financing of exports to countries that have a moderate to high risk rating but are strategically important for India, and suggest ways to mitigate the risks and suggestions for contingency events like Covid-19 and wars could also be examined.