What changed
The validity of interest rates on rupee export credit, previously set in October 2007, was extended to remain in force up to October 31, 2008. The new rates apply from May 1, 2008 to October 31, 2008. Additionally, interest subvention on export credit was extended by one year from April 1, 2008 to March 31, 2009, maintaining the same terms as on March 31, 2008.
What it means for you
Banks must continue to apply the ceiling rates on rupee export credit as per the Annex, with rates not exceeding BPLR minus 2.5 percentage points for pre-shipment credit up to 180 days and post-shipment credit up to 90 days. The subvention extension ensures exporters benefit from lower effective interest costs for another year, supporting export competitiveness.
What you must do
- Update internal systems to apply the ceiling rates (BPLR minus 2.5 percentage points) for export credit categories from May 1, 2008 to October 31, 2008.
- Ensure interest subvention on export credit is passed on to eligible exporters for the period April 1, 2008 to March 31, 2009, as per earlier circulars.
- Communicate the extended validity and subvention details to all branches handling export credit.
- Review and adjust any floating-rate export credit products to comply with the ceiling rates.
Who it affects
All scheduled commercial banks (excluding RRBs), Exporters availing rupee export credit, Bank branches handling pre-shipment and post-shipment credit
What are the new interest rate ceilings for rupee export credit?
From May 1, 2008 to October 31, 2008, banks cannot charge more than BPLR minus 2.5 percentage points per annum for pre-shipment credit up to 180 days and post-shipment credit up to 90 days, among other categories listed in the Annex.
Is the interest subvention on export credit still available?
Yes, the subvention has been extended by one year from April 1, 2008 to March 31, 2009, on the same terms as on March 31, 2008. Banks must continue charging rates not exceeding BPLR minus 4.5 and 6.5 percentage points for pre-shipment and post-shipment credit respectively for eligible exporters.
Does this circular affect export credit beyond the specified tenors?
No, interest rates for export credit beyond the tenors mentioned (e.g., pre-shipment beyond 180 days) are deregulated, and banks are free to set rates based on BPLR and spread guidelines.