What changed
The Government of India extended the 2% interest subvention scheme on rupee export credit for another year, from April 1, 2012 to March 31, 2013, covering the same eight sectors as before. Banks are now required to apply the subvention under the Base Rate system with a floor rate of 7%, and must submit quarterly claims with an external auditor's certificate.
What it means for you
Banks must adjust their lending rates for eligible export credit to reflect the 2% subvention, ensuring exporters pay no more than the Base Rate minus 2%, subject to a 7% floor. This reduces the cost of export finance for sectors like handicrafts, carpets, and SMEs, potentially boosting export activity. Lenders need to set up processes for quarterly claim submissions and auditor certifications to get reimbursed.
What you must do
- Update loan pricing systems to apply 2% subvention on rupee export credit for the eight eligible sectors, with a floor rate of 7%.
- Ensure full pass-through of subvention benefit to eligible exporters and maintain documentation for audit.
- Submit quarterly claims in the prescribed format to RBI within one month of quarter-end, accompanied by an external auditor's certificate.
- Submit a NIL statement for any quarter where no subvention is claimed.
Who it affects
All scheduled commercial banks (excluding RRBs) offering rupee export credit, Exporters in handicrafts, carpets, handlooms, SMEs, readymade garments, processed agriculture products, sport goods, and toys
What is the floor rate for export credit after applying the subvention?
The floor rate is 7% per annum, meaning banks cannot reduce the interest rate below 7% even after applying the 2% subvention.
How do banks claim the subvention from RBI?
Banks must submit quarterly claims in the specified format to RBI's Central Office within one month of quarter-end, along with an external auditor's certificate verifying the claim.
Which sectors are covered under this subvention scheme?
The eight sectors are handicrafts, carpets, handlooms, SMEs (as defined in the annex), readymade garments, processed agriculture products, sport goods, and toys.