What changed
The scheme is extended until June 30, 2024, with subvention rates unchanged: 2% for specified 410 HS line exporters and 3% for MSME manufacturers. A new pricing condition applies from FY 2023-24: banks with average lending rate above Repo+4% pre-subvention will be identified by DGFT and must furnish an undertaking to continue; repeated breaches may lead to debarment. The annual subvention cap of Rs 10 crore per IEC, effective from April 1, 2023, is reiterated.
What it means for you
Banks must monitor their average export credit pricing to stay within Repo+4% pre-subvention to avoid scheme restrictions. Non-compliant banks risk losing participation in the scheme, which could impact their export lending portfolio and customer relationships. The cap on subvention per IEC limits the subsidy benefit per exporter, requiring banks to track disbursements carefully from April 1, 2023.
What you must do
- Review your bank's average interest rate on export credit under the scheme for FY 2023-24; ensure it does not exceed Repo+4% pre-subvention.
- Prepare to furnish an undertaking to DGFT if your bank is identified as breaching the pricing cap; follow the format in the annex.
- Track subvention claims per IEC to ensure annual net subvention does not exceed Rs 10 crore from April 1, 2023.
- Update internal systems and training for export credit staff on the new pricing condition and subvention cap.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Primary (Urban) Cooperative Banks, State Cooperative Banks with AD Category-I license, Exim Bank, Exporters availing pre and post shipment rupee export credit
What is the new pricing condition for banks under the Interest Equalisation Scheme?
From FY 2023-24, if a bank's average interest rate on loans under the scheme (before subvention) exceeds Repo Rate + 4%, DGFT will identify the bank. Such banks must provide an undertaking to DGFT to continue in the scheme; further breaches may lead to debarment.
What is the subvention cap per exporter and from when does it apply?
The annual net subvention amount is capped at Rs 10 crore per Importer-Exporter Code (IEC) per financial year. This cap applies to all disbursements from April 1, 2023 onwards.
What are the subvention rates under the extended scheme?
The rates remain unchanged: 2% for manufacturers and merchant exporters exporting under specified 410 HS lines, and 3% for MSME manufacturers exporting under any HS line.