What changed
The Government of India extended the 2% interest subvention on rupee export credit for specified sectors for another year, from April 1, 2012 to March 31, 2013. This replaces the earlier subvention that was valid only until March 31, 2012. The eligible sectors remain unchanged: handicrafts, carpets, handlooms, SMEs, readymade garments, processed agriculture products, sport goods, and toys.
What it means for you
Urban co-operative banks with AD Category I licences must continue offering export credit at 2% below their normal lending rates to eligible sectors. They can claim reimbursement from RBI on a quarterly basis, but must ensure claims are backed by external auditor certificates. This impacts their net interest margins on these loans, but provides a competitive edge for exporters.
What you must do
- Update your lending rates for rupee export credit to eligible sectors to be 2% below the rates charged to other exporters.
- Submit quarterly claims for subvention reimbursement to RBI's Urban Banks Department, starting with the quarter ending June 30, 2012.
- Ensure each claim is accompanied by an external auditor's certificate certifying the subvention amount and period.
- Maintain accurate records of disbursement and repayment dates to calculate subvention on outstanding amounts until repayment or overdue date.
Who it affects
Scheduled Primary (Urban) Co-operative Banks holding AD Category I licence, Exporters in specified sectors: handicrafts, carpets, handlooms, SMEs, readymade garments, processed agriculture products, sport goods, toys
What is the subvention rate and period?
The subvention is 2% per annum on rupee export credit, applicable from April 1, 2012 to March 31, 2013.
How do we claim reimbursement?
Submit quarterly claims to RBI's Urban Banks Department at the Central Office in Mumbai, using the format in Annex II, along with an external auditor's certificate.
Which sectors are eligible?
Handicrafts, carpets, handlooms, SMEs (as defined in Annex I), readymade garments, processed agriculture products, sport goods, and toys.