What changed
The validity of interest rate ceilings on rupee export credit, originally set in April 2007, has been extended from October 31, 2007 to April 30, 2008. A new directive effective November 1, 2007 formalizes the rates in an annex, replacing the earlier circular's expiry date. The special lower cap of BPLR minus 4.5 percentage points for pre-shipment credit up to 180 days and post-shipment credit up to 90 days remains in place for specific exporter categories until March 31, 2008.
What it means for you
Banks must continue to apply the same ceiling rates on rupee export credit, ensuring predictable borrowing costs for exporters. The extension provides regulatory stability for lenders in pricing export loans, but the BPLR minus 2.5 percentage points cap may compress margins if BPLR rises. The separate, tighter cap for certain exporters requires careful monitoring to avoid overcharging.
What you must do
- Update internal systems to apply the ceiling rates (BPLR minus 2.5 percentage points) for all eligible export credit categories from November 1, 2007 to April 30, 2008.
- Ensure that for pre-shipment credit up to 180 days and post-shipment credit up to 90 days, rates do not exceed BPLR minus 4.5 percentage points for the specific exporter categories mentioned in earlier circulars.
- Review and adjust any export credit pricing that may have been set based on the previous expiry date to comply with the extended validity.
- Communicate the extended rate validity to relevant branches and export credit processing teams to prevent pricing errors.
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 teams managing BPLR-linked lending
What is the new validity period for the export credit interest rate ceilings?
The ceilings are now valid from November 1, 2007 to April 30, 2008, as per the directive issued on October 29, 2007.
Are banks allowed to charge rates below the ceiling?
Yes, the ceiling rates are maximum rates; banks are free to charge any rate below them, as stated in the annex note.
Does the special BPLR minus 4.5 percentage points cap still apply?
Yes, for pre-shipment credit up to 180 days and post-shipment credit up to 90 days, the cap of BPLR minus 4.5 percentage points continues for certain exporter categories until March 31, 2008.