Once our economy opened up post liberalization and globalization, the import and export industry became a huge sector in our economy. Even today India is one of the largest exporters of agricultural goods. So to provide financial support to importers and exporters the government set up the EXIM Bank. Let us take a look.
Export and Import Bank of India (EXIM)
The Export and Import Bank of India, popularly known as the EXIM Bank was set up in 1982. It is the principal financial institution in India for foreign and international trade. It was previously a branch of the IDBI, but as the foreign trade sector grew, it was made into an independent body.
The main function of the Export and Import Bank of India is to provide financial and other assistance to importers and exporters of the country. And it oversees and coordinates the working of other institutions that work in the import-export sector. The ultimate aim is to promote foreign trade activities in the country.
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The management of the EXIM bank is done by a board, headed by the Managing Director. There are 17 other Directors on the board. The whole paid-up capital of the bank (100 crores currently) is subscribed by the Central Government exclusively.
Functions of the EXIM Bank
Let us take a look at some of the main functions of Export and Import Bank of India bank:
- Finances import and export of goods and services from India
- It also finances the import and export of goods and services from countries other than India.
- It finances the import or export of machines and machinery on lease or hires purchase basis as well.
- Provides refinancing services to banks and other financial institutes for their financing of foreign trade
- EXIM bank will also provide financial assistance to businesses joining a joint venture in a foreign country.
- The bank also provides technical and other assistance to importers and exporters. Depending n the country of origin there are a lot of processes and procedures involved in the import-export of goods. The EXIM bank will provide guidance and assistance in administrative matters as well.
- Undertakes functions of a merchant bank for the importer or exporter in transactions of foreign trade.
- Will also underwrite shares/debentures/stocks/bonds of companies engaged in foreign trade.
- Will offer short-term loans or lines of credit to foreign banks and governments.
- EXIM bank can also provide business advisory services and expert knowledge to Indian exporters in respect of multi-funded projects in foreign countries
Importance of the EXIM Bank
Other than providing financial assistance, the Export and Import Bank of India bank is always looking for ways to promote the foreign trade sector in India. In the early 1990s, EXIM introduced a program in India known as the Clusters of Excellence.
The aim was to improve the quality standards of our imports and exports. It also has a tie-up with the European Bank for Reconstruction and Development. It has agreed to co-finance programs with them in eastern Europe.
In order to promote exports EXIM bank also has schemes such as production equipment finance program, export marketing finance, vendor development finance, etc.
Solved Question on EXIM
Q: The state governments also own a portion of the EXIM Bank. True or False?
Ans: This statement is False. The Central Government is the only subscriber of the EXIM Bank.