What changed
The eligible limit for export credit refinance (ECR) was reduced from 50% to 32% of outstanding rupee export credit eligible for refinance as at the end of the second preceding fortnight. The change was announced in the Second Bi-monthly Monetary Policy Statement 2014-15 and takes effect immediately. The reporting format in Annex III of the Master Circular was also updated to reflect the new 32% limit.
What it means for you
Banks will now get less liquidity from RBI against their export credit portfolio, potentially squeezing their funding for export loans. This could increase the cost of export credit for banks and may lead to tighter lending terms for exporters. The move signals RBI's gradual withdrawal of crisis-era liquidity support as the economy stabilizes.
What you must do
- Update internal systems and reporting formats to reflect the new 32% ECR limit immediately.
- Reassess liquidity planning and export credit pricing to account for reduced refinance availability.
- Communicate the change to treasury and credit teams handling export finance.
- Review outstanding export credit portfolios to ensure accurate calculation of eligible refinance limits.
Who it affects
All scheduled banks (excluding Regional Rural Banks), Treasury departments managing liquidity and refinance, Export credit lending teams, Exporters relying on bank credit
What is the new export credit refinance limit?
The limit has been reduced from 50% to 32% of the outstanding rupee export credit eligible for refinance as at the end of the second preceding fortnight.
When does this change take effect?
It takes effect immediately from June 3, 2014, as announced in the Second Bi-monthly Monetary Policy Statement 2014-15.
Which banks are excluded from this circular?
Regional Rural Banks (RRBs) are excluded from this change.