What changed
The earlier circular (April 28, 2009) had set the ceiling on pre-shipment and post-shipment rupee export credit rates at BPLR minus 2.5%, valid until October 31, 2009. This circular extends that same dispensation by six months, now valid up to April 30, 2010.
What it means for you
Banks must continue to offer export credit at rates not exceeding BPLR minus 2.5% for the specified tenors. This keeps export financing affordable for borrowers, but also caps the interest income banks can earn on these loans. Banks have flexibility to charge lower rates if they choose.
What you must do
- Update your lending systems to apply the ceiling rate of BPLR minus 2.5% for pre-shipment credit up to 270 days and post-shipment credit up to 180 days from November 1, 2009.
- Ensure that for tenors beyond these limits, interest rates are freed from the ceiling and can be set at market rates.
- Communicate the extension to your export credit teams and update internal circulars accordingly.
- Acknowledge receipt of this RBI circular as instructed.
Who it affects
All scheduled commercial banks offering rupee export credit, Exporters availing pre-shipment or post-shipment credit in rupees
What is the new interest rate ceiling for rupee export credit?
The ceiling remains unchanged at BPLR minus 2.5 percentage points for pre-shipment credit up to 270 days and post-shipment credit up to 180 days. This extension is valid from November 1, 2009 to April 30, 2010.
Can banks charge interest rates above the ceiling?
No, the ceiling is a maximum. Banks can charge any rate below the ceiling, but cannot exceed BPLR minus 2.5% for the specified tenors. For tenors beyond these limits, rates are free.
Does this circular affect export credit in foreign currency?
No, this circular specifically addresses rupee export credit. Foreign currency export credit is governed by separate instructions.