What changed
The Government widened the existing 2% interest subvention scheme to include 134 tariff lines of engineering products for the period January 1 to March 31, 2013. Additionally, the scheme was extended for another year (April 1, 2013 to March 31, 2014) for handicrafts, carpet, handlooms, SMEs, readymade garments, processed agriculture products, sports goods, toys, and the same engineering goods.
What it means for you
Banks must now offer a 2% lower interest rate on pre- and post-shipment rupee export credit to eligible engineering exporters, with a floor rate of 7%. The subvention must be fully passed on to borrowers. For FY 2013-14, the scheme continues for eight specified sectors, requiring banks to adjust their lending rates accordingly and submit quarterly claims with auditor certificates.
What you must do
- Reduce interest rate on eligible export credit by 2% (subject to 7% floor) for engineering goods listed in Annex I from Jan 1 to Mar 31, 2013.
- Extend the same subvention to handicrafts, carpet, handlooms, SMEs, readymade garments, processed agriculture products, sports goods, and toys from Apr 1, 2013 to Mar 31, 2014.
- Submit quarterly claims for subvention reimbursement to RBI's Central Office using Annex III format, accompanied by an external auditor's certificate.
- Ensure full pass-through of the 2% subvention benefit to eligible exporters.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Exporters in engineering goods (134 tariff lines), Exporters in handicrafts, carpet, handlooms, SMEs, readymade garments, processed agriculture products, sports goods, toys
What is the floor rate for export credit after subvention?
The interest rate after deducting the 2% subvention cannot go below 7% per annum.
How do banks claim the subvention amount from RBI?
Banks must submit quarterly claims in the format given in Annex III to the Chief General Manager-in-Charge, DBOD, RBI Central Office, Mumbai, along with an external auditor's certificate certifying the claim.
Which sectors are covered under the extended scheme for FY 2013-14?
The scheme covers handicrafts, carpet, handlooms, SMEs (as defined in Annex II), readymade garments, processed agriculture products, sports goods, toys, and the 134 engineering tariff lines.