The Export-Import Bank of India (India Exim) has established a new subsidiary, India Exim Finserve, to expand its short-term finance business and boost its offering for small and medium-sized firms.

The company will offer a range of trade finance products to Indian exporters, with a primary focus on export factoring. The inauguration of India Exim Finserve took place at an event in Gujarat in early August.

The new business will involve India Exim purchasing invoices from overseas buyers of Indian exports, therefore facilitating quicker payment to local companies while absorbing the risk of non-payment by the overseas suppliers.

This is anticipated to give Indian exporters confidence to “explore new markets,” and will be particularly beneficial for micro, small and medium-sized businesses, who can rely on the quality of their accounts receivable rather than collateral, as would ordinarily be the case with a loan, India Exim says.

India Exim Finserve will also cater to other areas of trade finance such as forfaiting, supply chain finance, import factoring and import financing.

“Exim Bank is now covering the entire canvas of trade with bank-intermediated trade finance along with open account trade,” says Harsha Bangari, the bank’s managing director.

The move aligns with broader efforts at India Exim to grow the bank’s short-term trade finance portfolio. In 2022 the bank launched a trade assistance programme (TAP) to coax exporters into new geographies by providing domestic lenders with partial or full guarantees to mitigate payment risks.

While the factoring business is expected to focus on exports into developed economies, such as Europe and North America, TAP is aimed at building trust between the Indian banking system and lenders in developing or untapped markets, such as in Africa and South America and within Asia.

In Africa, the bank has already struck TAP agreements with lenders in several countries, including Côte d’Ivoire, Liberia, Mauritania, Tanzania, Uganda, Ethiopia, Egypt and Rwanda, India Exim’s deputy managing director, N Ramesh, tells GTR, while the bank has also facilitated transactions in South American countries including Argentina and Ecuador.

“Wherever certain transactions are not happening because of unfamiliarity, because of insufficient limits between countries – or between the banks – we are trying to offer support,” Ramesh says.

“Many more [African] countries are in the pipeline,” he adds.

As of March 31, India Exim’s TAP scheme supported over 120 transactions and backed exports worth a total of US$305mn to 17 countries, through credit lines and refinance facilities. The bank intends to “multiply its exposure” in the coming years, Ramesh tells GTR.

The launch of the India Exim Finserve subsidiary follows a broader push by the Indian government to stimulate the domestic factoring industry, amid concerns regulatory hurdles had been constraining the sector.

According to the Reserve Bank of India, recent regulatory changes under the 2011 Factoring Regulation Act are set to expand the scope of non-bank financial companies eligible to engage in factoring from seven to 182.