Mumbai, Aug 1 The two percentage point interest rate subvention given by the Government to all scheduled commercial banks in respect of rupee export credit to certain categories of exporters has been extended for six months, from October 1, 2009 till March 31, 2010, according to the Reserve Bank of India.
Banks extending rupee export credit to employment-oriented sectors as textiles (including handloom), handicrafts, carpets, leather, gems and jewellery, marine products, and small and medium enterprises are eligible for the subvention. These sectors were badly hit by the global slowdown in demand for exports.
The interest subvention was introduced from December 1, 2008 till March 31, 2009 on pre- and post-shipment rupee export credit. It was then extended up to September 30.
As per the RBI directive, banks can charge interest rate not exceeding benchmark prime lending rate minus 4.5 percentage points on pre-shipment credit up to 270 days and post-shipment credit up to 180 days on the outstanding amount.
However, the total subvention will be subject to the condition that the interest rate, after subvention will not fall below 7 per cent (the rate applicable to the agriculture sector under priority sector lending).
According to the central bank, banks have to ensure that the benefit of the two per cent interest subvention is passed on completely to the eligible exporters.
Source : Business Line