What changed
The previous circular's interest rate validity on rupee export credit, which was set to expire earlier, has been extended to October 31, 2007. The new directive, effective May 1, 2007, formalizes the same ceiling rates (BPLR minus 2.5 percentage points) for specified categories of export credit.
What it means for you
Banks must continue to cap interest rates on eligible rupee export credit at BPLR minus 2.5% for the extended period, ensuring affordable credit for exporters. For tenors beyond the specified limits, banks retain full freedom to set rates based on BPLR and spread guidelines, allowing flexibility for longer-term export financing.
What you must do
- Update your lending systems to apply the BPLR minus 2.5% ceiling on all eligible pre-shipment and post-shipment export credit from May 1 to October 31, 2007.
- Ensure that for tenors beyond the prescribed limits (e.g., pre-shipment beyond 180 days), interest rates are set as per your bank's BPLR and spread policy.
- Communicate the extended validity to your export credit teams and loan officers to avoid any compliance gaps.
Who it affects
All scheduled commercial banks (excluding RRBs) offering rupee export credit, Exporters availing pre-shipment and post-shipment credit in rupees, Bank treasury and credit policy teams managing BPLR-linked lending
What is the new interest rate ceiling for rupee export credit?
The ceiling remains BPLR minus 2.5 percentage points per annum for specified categories, effective from May 1 to October 31, 2007.
Are banks allowed to charge lower rates than the ceiling?
Yes, banks are free to charge any rate below the ceiling, as these are maximum rates.
What happens to export credit tenors beyond the specified limits?
Interest rates for tenors beyond the prescribed periods (e.g., pre-shipment over 180 days) are deregulated, and banks can set rates based on BPLR and spread guidelines.