What changed
RBI noted that some banks did not reduce interest rates upfront for eligible exporters under the interest subvention scheme, or delayed the benefit, despite submitting claims with auditor certificates stating compliance. The circular reiterates the requirement from Master Circular DBOD.No.DIR.(Exp).BC.07/04.02.02/2009-10 dated July 1, 2009, para 4.3, and demands strict adherence.
What it means for you
Banks must immediately review their export credit disbursement processes to ensure the subvention benefit is passed on at the time of lending, not later. Failure to comply could lead to regulatory action, and banks may need to investigate and report any false auditor certifications.
What you must do
- Ensure strict adherence to the existing instructions on upfront interest subvention.
- Initiate corrective measures to ensure compliance with the guidelines.
- Examine any wrong certification by auditors and take appropriate action, advising RBI accordingly.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Export credit lending teams, Internal audit and compliance departments
What is the interest subvention rate mentioned in this circular?
The circular refers to a 2% or 4% interest subvention on rupee export credit for specified categories of exports, as per the Government of India scheme.
What should banks do if they find past non-compliance?
Banks must take corrective measures to ensure strict compliance going forward and examine any wrong certification by auditors, reporting actions to RBI.
Does this circular apply to Regional Rural Banks?
No, the circular is addressed to all Scheduled Commercial Banks excluding RRBs.