What changed
The RBI extended the period for which post-shipment rupee export credit can be availed at the concessional rate of BPLR minus 2.5 percentage points from 90 days to 180 days. This change took effect from November 28, 2008, and applies until April 30, 2009. The revised tenor is now reflected in the updated annexure to the directive.
What it means for you
Banks must now offer the lower interest rate on post-shipment export credit for up to 180 days instead of the earlier 90-day limit, providing longer working capital support to exporters. This will reduce the interest cost for exporters during the extended period, but banks may see a slight dip in net interest margins on these loans. The move is temporary, valid until April 30, 2009, and aims to cushion exporters from the global demand slowdown.
What you must do
- Update your bank's lending system to apply the BPLR minus 2.5% ceiling on post-shipment rupee export credit for tenors up to 180 days.
- Communicate the revised tenor to your export credit processing teams and branch managers handling trade finance.
- Monitor the expiry of this temporary relief on April 30, 2009, and plan for reversion to standard tenor limits.
- Ensure compliance with the directive by reviewing all post-shipment credit sanctions issued from November 28, 2008.
Who it affects
All scheduled commercial banks (excluding RRBs) offering rupee export credit, Exporters availing post-shipment finance, Trade finance and credit departments of banks
Does this extension apply to pre-shipment credit as well?
No, the extension only applies to post-shipment rupee export credit. Pre-shipment credit remains at the existing tenor limits (up to 270 days) as per the annexure.
Can banks charge a rate lower than BPLR minus 2.5%?
Yes, the rate is a ceiling, so banks are free to offer lower rates if they choose, as per the note in the directive.
Is this change permanent?
No, the revised interest rates and tenor are effective only from November 28, 2008, to April 30, 2009, after which the earlier limits may apply unless further extended.