BOMBAY. Aug 7: A cut in export credit refinance announced by India's central bank yesterday would help banks maintain a better spread on their export credit, bankers said, reports Reuter.

The Reserve Bank of India (RBI) said it would cut its export credit refinance rate to seven per cent from nine with immediate effect.

It is only fair that the refinance rate has been cut. said PH Ravikumar. Executive Vice-President at ICICI banking corporation.

Otherwise it would have been difficult for banks to lend to exporters with both the refinance and export credit rates at nine per cent, he said.

Commerce Minister Ramakrishna Hedge on Wednesday announced a 200 basis point cut in the rates on preshipment and post-shipment export credit to nine per cent.

Bankers had expected a cut in either the RBI's bank rate, to which all refinance rates are

linked, or in the export credit refinance rate separately to follow.

We now know for certain that a bank rate, cut will definitely not happen, said V Ravikumar. chief foreign exchange dealer at ABN Amro bank in Bombay.'

Forward dollar premiums should be firmer tomorrow since they had come down on expectations on a bank rate cut, he added.

ICICI's Ravikumar said the cut in export refinance would offer some Incentive to bankers to lend to exporters, which was to a very attractive proposition.

As it is bankers are shy of lending to exporters as it is not very remunerative. Ravikumar said. A two percentage point spread will make it less unattractive for banks.

The central banker requires 12 per cent of net bank credit by Indian banks to go towards exports but banks can get refinance for their export credit from the RBI.