What changed
The Government decided to close the interest rate subvention scheme on rupee export credit, which was earlier extended until March 31, 2009. RBI issued a directive under Sections 21 and 35A of the Banking Regulation Act, 1949, to end the scheme from September 30, 2008.
What it means for you
Banks can no longer offer subsidized export credit rates under this scheme after September 30, 2008. Exporters will face higher borrowing costs, and banks must revise their interest rate schedules for export credit accordingly.
What you must do
- Notify all exporter clients covered under the scheme about the closure effective September 30, 2008.
- Update internal systems and loan documentation to remove subvention benefits from October 1, 2008.
- Communicate revised interest rates for rupee export credit to branches and customers.
- Ensure compliance with the directive issued under Sections 21 and 35A of the Banking Regulation Act, 1949.
Who it affects
All scheduled commercial banks (excluding RRBs), Exporters availing rupee export credit under the subvention scheme
When does the subvention scheme close?
The scheme closes with effect from September 30, 2008. Banks must stop offering subvention benefits from October 1, 2008.
What should banks do to comply?
Banks must inform their exporter clients about the closure and adjust interest rates on rupee export credit accordingly. The directive is issued under Sections 21 and 35A of the Banking Regulation Act, 1949.
Does this affect all export credit?
This closure applies only to the interest rate subvention scheme on rupee export credit. Other export credit facilities may continue as per existing instructions.