The Finance Ministry is set to hold a high-level meeting on February 5 to ensure smooth trade payments amid challenges emanating due to disruption in the Red Sea region. Payment settlement mechanisms for the disrupted trade routes along with pending issues relating to vostro accounts are likely to be taken up in the meeting, officials said.
The meeting, which is to be chaired by Department of Financial Services (DFS) Secretary Vivek Joshi, will be attended by officials from the ministries of Finance, Commerce and Industry, External Affairs, Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority of India (IRDAI).
“It is a coordination meeting planned between government departments, regulators and banks to discuss trade related payment issues. Objective is to hear from all stakeholders and find solutions for orderly trade transactions and settlement thereof,” a senior government official told The Indian Express.
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“The RBI and the government interact with all stakeholders to facilitate resolution of vexatious issues. Subject to usual compliance requirements banks extend trade finance to all eligible traders,” the official added.
This comes a week after the Ministry of Commerce and Industry had asked the DFS to maintain credit flow to the exporters amid disruption in the Red Sea region that could impact over 80 per cent of the exports to Europe, following an inter-ministerial meeting on January 17.
Freight rates to Europe have more than doubled due to security tension in the Red Sea region. Fears of disruptions in the Red Sea region have risen and oil prices have begun inching up ever since the US and the UK earlier this month attacked Houthi rebels in Yemen in retaliation for the attacks on their commercial ships in the Red Sea region.
Indian shipments of low value products such as agriculture and textiles to Europe are primarily expected to face the impact of disruption in the Red Sea region due to surging freight costs. Earlier, the government had asked Export Credit Guarantee Corporation (ECGC) not to raise insurance premiums amid rising cost of shipping to Europe.