Reserve Bank of India extends Interest Equalisation Scheme for Export Credit
The Reserve Bank of India (RBI) has announced an extension of the Interest Equalisation Scheme for Pre and Post Shipment Rupee Export Credit (Scheme) up to June 30, 2024. Under the scheme, the rate of interest equalisation will be 2 per cent for manufacturers and merchant exporters exporting under specified 410 HS lines and 3 per cent for MSME manufacturers exporting under any HS line.
In addition, banks that have priced the loans covered under this scheme at an average interest rate of greater than repo rate + 4 per cent prior to subvention would be subjected to certain restrictions under the scheme, effective from FY 2023-24. The Director General of Foreign Trade (DGFT) will identify banks in breach of this provision and they will be restricted from participating in the scheme until they furnish an undertaking in the specified format to the DGFT.
Furthermore, the annual net subvention amount has been capped at Rs 10 crore per Importer-Exporter Code (IEC) in a given financial year, with all disbursements from April 1, 2023 being reckoned for this purpose.
This extension of the Interest Equalisation Scheme provides a boost to manufacturers, merchant exporters, and MSMEs, allowing them to continue exporting under specified HS lines with reduced interest rates. However, the restrictions imposed on banks pricing loans above the specified interest rate aim to ensure compliance with the scheme and prevent misuse of the benefits provided.
The government’s move to cap the annual net subvention amount per IEC in a given financial year indicates a push for greater efficiency and accountability in the allocation of funds for export credit. This measure may serve to streamline the process and prioritize support for exporters with a demonstrated track record of success.
Overall, the extension of the Interest Equalisation Scheme and the accompanying restrictions and caps demonstrate the government’s commitment to promoting and supporting export activities, while also ensuring responsible use of financial resources. This decision is likely to have a positive impact on the export sector, facilitating growth and competitiveness in the global market.
In conclusion, the RBI’s notification regarding the extension of the Interest Equalisation Scheme for Export Credit reflects the government’s dedication to fostering a favorable environment for exporters, with provisions aimed at maintaining transparency and accountability in the disbursement of funds. This news will be welcomed by stakeholders in the export industry as a positive step towards continued support for their endeavors.
