What changed
The earlier dispensation setting the ceiling on pre-shipment and post-shipment rupee export credit rates at BPLR minus 2.5 percentage points was valid only up to April 30, 2009. RBI has now extended this same ceiling arrangement for another six months, from May 1, 2009 to October 31, 2009.
What it means for you
Banks must continue to offer export credit at rates not exceeding BPLR minus 2.5% for the specified tenors, ensuring affordable financing for exporters. This extension provides regulatory certainty for lenders and borrowers, but banks retain flexibility to charge below the ceiling. The cap applies only to pre-shipment credit up to 270 days and post-shipment credit up to 180 days; beyond these tenors, rates are free.
What you must do
- Update internal systems and loan documentation to reflect the extended validity of the BPLR minus 2.5% ceiling up to October 31, 2009.
- Communicate the extension to all branches handling export credit to ensure compliance from May 1, 2009.
- Review existing export credit portfolios to confirm that no loans exceed the ceiling rate during the extended period.
- Advise relationship managers to inform exporter clients about the continued cap to manage expectations.
Who it affects
All scheduled commercial banks offering rupee export credit, Exporters availing pre-shipment or post-shipment rupee credit, Treasury and credit policy teams at banks
What is the exact interest rate ceiling for rupee export credit under this circular?
For pre-shipment credit up to 270 days and post-shipment credit up to 180 days, the rate must not exceed the bank's Benchmark Prime Lending Rate (BPLR) minus 2.5 percentage points.
Does this ceiling apply to export credit beyond the specified tenors?
No. For pre-shipment credit beyond 270 days and post-shipment credit beyond 180 days, banks are free to set interest rates without any ceiling.
Can banks charge rates lower than the ceiling?
Yes. The circular explicitly states that since these are ceiling rates, banks are free to charge any rate below the ceiling.