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The Reserve Bank of India (RBI) has officially extended the Interest Equalisation Scheme for pre- and post-shipment rupee export credit until June 30, maintaining the same scope and coverage, according to a notification on the central bank’s website.
The decision to extend the scheme comes after the Union Cabinet approved an additional allocation of Rs 2,500 crore in December, ensuring the continuation of the interest equalisation subsidy scheme on pre- and post-shipment rupee export credit until the end of June.
The scheme, designed to provide pre- and post-shipment export credit, including packing credit, to eligible exporters, allows banks to offer this benefit to qualified exporters. The banks then claim reimbursement from the RBI based on certification by an external auditor.
Revised provisions
Under the scheme’s revised provisions, the interest equalisation rates for manufacturers and merchant exporters, exporting under specified 410 Harmonised System lines, are set at 2% and 3% for micro-small and medium enterprises manufacturers exporting under any Harmonised System line.
Banks that have priced the loans covered under the scheme at an average interest rate exceeding the sum of the repo rate and 4% before subvention will face certain restrictions under the scheme starting from the 2023-24 financial year (April-March). An assessment for the current financial year, ending in March, will identify banks breaching this provision, as per the notification.
According to the stated restrictions, banks pricing loans above the specified threshold must furnish an undertaking to the Director General of Foreign Trade to continue participating in the scheme. Any subsequent breaches assessed by the Director General of Foreign Trade may result in the debarment of the bank from the scheme, the notification clarified.
The notification highlighted that the annual net subvention amount for scheme beneficiaries has been capped at 100 million rupees per importer-exporter code in a given financial year. This information has been communicated to the trade industry and banks. Starting from April 1, 2023, all disbursements will be considered for this purpose.
While the scheme, initiated on April 1, 2015, was initially valid for five years until March 2020, it has been consistently extended, including a one-year extension during the COVID-19 pandemic, with subsequent extensions and fund allocations to support the export credit initiative.
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