What changed
RBI extended an additional 2% interest subvention on pre-shipment and post-shipment rupee export credit for four specific sectors, on top of the existing 2% subvention. This brings the total subvention to 4% for these sectors. The interest rate cap was set at BPLR minus 6.5%, with a minimum floor of 7%.
What it means for you
Banks must now offer concessional export credit to leather, marine, textiles (excluding man-made fibre), and handicraft exporters at rates not exceeding BPLR minus 6.5%, but not below 7%. This reduces banks' net interest margins on these loans but supports export competitiveness. The floor ensures rates don't fall below priority sector agriculture lending rates.
What you must do
- Update lending systems to apply BPLR minus 6.5% cap on pre-shipment (up to 180 days) and post-shipment (up to 90 days) credit for the specified sectors.
- Ensure interest rate after subvention does not fall below 7% per annum.
- Apply the 270-day pre-shipment term for the carpet sector; all other sectors get 180 days.
- Communicate the revised rates to branches handling export credit for leather, marine, textiles, and handicrafts.
- Validate compliance with the directive from November 1, 2007 to March 31, 2008.
Who it affects
Scheduled commercial banks (excluding RRBs), Exporters in leather and leather manufactures, Exporters of marine products, Exporters of textiles (including RMG and carpets, excluding man-made fibre), Handicraft exporters
What is the total subvention now available for these sectors?
The total subvention is 4% per annum—2% from the earlier circular plus an additional 2% from this directive.
What is the maximum interest rate banks can charge on these loans?
Banks cannot charge more than BPLR minus 6.5% on pre-shipment credit up to 180 days and post-shipment credit up to 90 days, subject to a floor of 7%.
Does the carpet sector have different credit terms?
Yes, for the carpet sector, pre-shipment credit is allowed up to 270 days, while post-shipment remains at 90 days like other sectors.