What changed
The Government of India decided to raise the interest subvention rate on pre- and post-shipment rupee export credit for specified sectors from 2% to 3%, effective August 1, 2013. RBI issued a directive on August 26, 2013, implementing this increase for scheduled UCBs holding AD Category I licence. Earlier circulars had extended the 2% subvention up to March 31, 2014.
What it means for you
UCBs can now offer a higher subsidy of 3% on export credit to eligible sectors, reducing the effective interest cost for exporters. This makes export financing more attractive for both banks and their customers. Banks must update their lending rates and systems to reflect the new subvention rate from August 1, 2013.
What you must do
- Update internal systems and loan documentation to apply 3% interest subvention on rupee export credit for specified sectors from August 1, 2013.
- Communicate the revised subvention rate to all branches handling export credit and ensure compliance with the directive.
- Review and maintain records to claim the subvention from the Government of India as per existing terms and conditions.
- Ensure that all other terms from circulars dated January 22, 2013 and June 4, 2013 remain unchanged and are followed.
Who it affects
Scheduled Primary (Urban) Co-operative Banks holding AD Category I licence, Exporters in specified sectors availing rupee export credit from UCBs, Treasury and credit departments of UCBs handling export finance
From which date is the increased subvention of 3% applicable?
The increased subvention of 3% is effective from August 1, 2013, as per the Government of India's decision and RBI directive dated August 26, 2013.
Does this circular change any other terms of the export credit scheme?
No, all other terms and conditions from earlier circulars (dated January 22, 2013 and June 4, 2013) remain unchanged. Only the subvention rate has been increased from 2% to 3%.
Which banks are covered by this directive?
This directive applies to Scheduled Primary (Urban) Co-operative Banks that hold an AD Category I licence for foreign exchange business.