What changed
The earlier circular had set the interest rate ceiling on pre-shipment and post-shipment rupee export credit at BPLR minus 2.5%, valid only until October 31, 2007. This circular extends that same ceiling arrangement until April 30, 2008. Additionally, it confirms that a separate, more concessional ceiling of BPLR minus 4.5% remains applicable for certain exporter categories for the period April 1, 2007 to March 31, 2008.
What it means for you
Banks must continue to cap interest rates on short-term rupee export credit at BPLR minus 2.5% for another six months, ensuring exporters get predictable funding costs. The separate BPLR minus 4.5% ceiling for specific categories means banks need to maintain two-tier pricing for export loans. This extension provides stability but also limits banks' ability to reprice export credit upward in a rising rate environment.
What you must do
- Update your loan pricing systems to apply BPLR minus 2.5% ceiling on pre-shipment credit up to 180 days and post-shipment credit up to 90 days until April 30, 2008.
- Identify and apply the lower BPLR minus 4.5% ceiling for eligible exporter categories as per the referenced DBOD circulars for FY 2007-08.
- Ensure all export credit sanction letters and rate sheets reflect the extended validity period.
- Communicate the extension to your treasury and credit teams to avoid any pricing errors.
Who it affects
All scheduled commercial banks offering rupee export credit, Exporters availing pre-shipment or post-shipment credit in rupees, Bank treasury and credit policy teams
What is the exact interest rate ceiling for standard rupee export credit under this circular?
For pre-shipment credit up to 180 days and post-shipment credit up to 90 days, the ceiling is BPLR minus 2.5 percentage points. This applies from November 1, 2007 to April 30, 2008.
Does this circular change the concessional rate for certain exporters?
No, it only extends the general ceiling. The separate concessional ceiling of BPLR minus 4.5% for specific exporter categories (as per earlier DBOD circulars) remains unchanged for the period April 1, 2007 to March 31, 2008.
Can banks charge interest rates below the ceiling?
Yes, the circular explicitly states that since these are ceiling rates, banks are free to charge any rate below the stipulated ceiling.