What changed
The validity period for the interest rate ceilings on rupee export credit, originally set in April 29, 2005 circular, has been extended to April 30, 2006. The rates themselves remain unchanged from the previous circular. A new directive with an annex detailing the applicable rates has been issued effective November 1, 2005.
What it means for you
Banks must continue to apply the same ceiling rates on rupee export credit for another six months, ensuring stability for exporters. The extension gives lenders clarity on pricing for pre-shipment and post-shipment credit, with most short-term products capped at BPLR minus 2.5 percentage points. Longer tenors and certain categories remain free from ceilings, allowing banks flexibility.
What you must do
- Update your lending systems to apply the extended rate ceilings from November 1, 2005 to April 30, 2006.
- Ensure pre-shipment credit up to 180 days and post-shipment credit up to 90 days do not exceed BPLR minus 2.5 percentage points.
- Review and apply free pricing for longer tenors and categories like deferred credit beyond 180 days and ECNOS.
- Acknowledge receipt of the circular as instructed.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Export credit departments, Treasury and lending teams handling rupee export credit
Which export credit categories are freed from interest rate ceilings?
Categories like pre-shipment credit beyond 180 days up to 270 days, post-shipment usance bills beyond 90 days up to 6 months, deferred credit beyond 180 days, and ECNOS (both pre-shipment and post-shipment) are free from ceilings.