What changed
RBI added four new sectors—Leather & Leather Manufactures, Jute Manufacturing including Floor Covering, Engineering Goods, and Textiles—to the existing list of Handicrafts, Carpets, Handlooms, and SMEs eligible for 2% interest subvention on rupee export credit. The subvention period remains April 1, 2010 to March 31, 2011. Banks must now use a modified claim format for advances linked to Base Rate from July 1, 2010.
What it means for you
Banks must extend the 2% subvention benefit to exporters in the newly added sectors, reducing the effective interest rate to a floor of 7% after subvention. This increases the scope of concessional export credit, requiring banks to update their lending systems and claim processes. The change aligns with the Base Rate system, ensuring all fresh or renewed export credit advances are priced at or above Base Rate.
What you must do
- Update internal systems to apply 2% subvention to the four new sectors: Leather, Jute, Engineering Goods, and Textiles.
- Ensure all rupee export credit advances from July 1, 2010 are at or above Base Rate, with subvention reducing rate to a minimum of 7%.
- Use the new Annex II claim format for advances linked to Base Rate; retain old format for BPLR-linked advances.
- Train staff on the expanded sector list and revised claim submission process for subvention claims.
- Verify SME definitions per Annex III (micro up to Rs 25 lakh, small up to Rs 5 crore, medium up to Rs 10 crore investment in plant & machinery).
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Exporters in Handicrafts, Carpets, Handlooms, SMEs, Leather, Jute, Engineering Goods, and Textiles sectors, Bank branches handling export credit and subvention claims
What is the floor rate for export credit after subvention?
The interest rate after applying the 2% subvention cannot go below 7% per annum, as per the circular.
Which sectors are newly added for subvention?
Leather & Leather Manufactures, Jute Manufacturing including Floor Covering, Engineering Goods, and Textiles were added to the existing list of Handicrafts, Carpets, Handlooms, and SMEs.
When must banks use the new claim format?
Banks must use the new Annex II format for claiming subvention on rupee export credit advances granted or renewed on or after July 1, 2010, which are linked to the Base Rate system.