What changed
The previous circular's interest rate validity on rupee export credit, which was set to expire, has been extended to April 30, 2010. The applicable rates are now specified in an annexure to a new directive effective November 1, 2009.
What it means for you
Banks must continue to apply the ceiling rate of BPLR minus 2.5 percentage points for specified export credit categories until end-April 2010. This provides stability for exporters and banks in pricing short-term export finance. Beyond the prescribed tenors, banks have full freedom to set rates based on BPLR and spread guidelines.
What you must do
- Update your lending systems to apply the ceiling rate of BPLR minus 2.5 percentage points for eligible export credit from November 1, 2009 to April 30, 2010.
- Ensure that for tenors beyond those specified (e.g., pre-shipment over 270 days), interest rates are deregulated and set per BPLR and spread guidelines.
- Communicate the extended validity and unchanged rate structure to your export credit processing teams and branches.
Who it affects
All scheduled commercial banks (excluding RRBs) offering rupee export credit, Exporters availing pre-shipment and post-shipment credit, Bank treasury and credit policy teams
What is the ceiling interest rate for rupee export credit under this circular?
The ceiling rate is BPLR minus 2.5 percentage points per annum for categories like pre-shipment credit up to 270 days and post-shipment credit up to 180 days (or 365 days under Gold Card Scheme).
Can banks charge interest rates below the ceiling?
Yes, the circular states that since these are ceiling rates, banks are free to charge any rate below the ceiling.
Does this circular affect export credit beyond the specified tenors?
No, for tenors beyond those listed (e.g., pre-shipment over 270 days), interest rates are deregulated and banks can decide rates based on BPLR and spread guidelines.