What changed
The earlier dispensation, which set the ceiling on pre-shipment and post-shipment rupee export credit at BPLR minus 2.5%, was valid only until April 30, 2007. RBI has now extended this validity for another six months, up to October 31, 2007, without any change in the rate or tenor conditions.
What it means for you
Banks must continue to offer export credit at rates not exceeding BPLR minus 2.5% for the specified tenors, ensuring cost predictability for exporters. This extension maintains the current pricing framework, so no repricing or system changes are needed immediately. However, banks should monitor BPLR movements to ensure compliance with the ceiling.
What you must do
- Update internal systems and loan documentation to reflect the extended validity period up to October 31, 2007.
- Communicate the extension to export credit teams and ensure all new sanctions from May 1, 2007 adhere to the BPLR minus 2.5% ceiling.
- Review existing export credit portfolios to confirm that no loans are priced above the ceiling for the applicable tenors.
- Prepare for a possible review or change after October 31, 2007, as the extension is time-bound.
Who it affects
All scheduled commercial banks offering rupee export credit, Exporters availing pre-shipment or post-shipment credit in rupees, Treasury and credit risk teams managing BPLR-linked pricing
What is the exact interest rate ceiling for rupee export credit under this circular?
The ceiling is BPLR minus 2.5 percentage points for pre-shipment credit up to 180 days and post-shipment credit up to 90 days (including demand bills for transit period). Banks can charge any rate below this ceiling.
Does this extension apply to export credit beyond the specified tenors?
No. For tenors beyond 180 days (pre-shipment) or 90 days (post-shipment), interest rates are free from any ceiling, as per the note in the circular.
When does the new validity period start and end?
The extended dispensation is effective from May 1, 2007, and remains valid until October 31, 2007.