What changed
The eligible limit for export credit refinance (ECR) was reduced from 50% to 15% of outstanding rupee export credit eligible for refinance as at the end of the second preceding fortnight. This change was announced in the Second Quarter Review of Monetary Policy 2009-10 and takes immediate effect. The reporting format in Annex III of the Master Circular was also updated accordingly.
What it means for you
Banks will now receive significantly lower refinance from RBI against their export credit portfolio, reducing their access to cheap liquidity. This could compress margins on export lending and may require banks to adjust their funding strategies or pricing for export credit. The move signals RBI's confidence in easing liquidity conditions and normalizing crisis-era support.
What you must do
- Recalculate your ECR limit using the new 15% rate for the current and upcoming fortnights.
- Update internal reporting systems and the revised Part A format in Annex III of the Master Circular.
- Review your export credit portfolio to identify any impact on liquidity and profitability.
- Communicate the change to your treasury and credit teams handling export finance.
Who it affects
All scheduled banks (excluding RRBs) that avail export credit refinance, Treasury departments managing liquidity and refinance operations, Credit teams handling export finance products
What is the new ECR limit and when does it apply?
The eligible limit is reduced to 15% of outstanding rupee export credit eligible for refinance as at the end of the second preceding fortnight, effective from October 27, 2009.
Which export credits are excluded from the refinance calculation?
Exclusions include export bills rediscounted with other banks/Exim Bank/FIs, credit refinanced from NABARD/Exim Bank, PCFC, export bills rediscounted abroad, overdue rupee export credit, and other ineligible export credit.
Does this affect all banks equally?
The circular applies to all scheduled banks except Regional Rural Banks (RRBs), so RRBs are not impacted by this change.