On Nov. 29, IND RBI updated scheme on interest equalization rate.
IND RBI said it will increase interest equalization rate from 3% to 5% in respect of exports by the micro, small and medium enterprises (MSME) sector manufacturers.
Made under interest equalization scheme on pre/post shipment rupee export credit.
Using same logic as per para 2(c) in previouscirculars, scheme is available to exports under 416 tariff lines [ITC (HS) code of 4 digits], exports made by MSMEs on all codes.
Benefit all eligible MSME exporters, and increase will be effective from Nov. 28, 2018.
May 2020, Extension
On May 13, 2020, IND RBI approved the extension of the interest equalization scheme for pre and post shipment Rupee export credit, with the same scope and coverage.
On Apr. 12, 2021, IND RBI approved the extension of the interest equalization scheme for pre and post shipment Rupee export credit, with the same scope and coverage.
Extension takes effect Apr. 1, 2021 to Jun. 30, 2021, covering a period of 3 months.
Jul. 2021 Further Extension
On Jul. 1, 2021, IND RBI said IND GVT approved the extension of the scheme for pre and post shipment rupee export credit, with the same scope and coverage to Sep. 30.
The extension takes effect from Jul. 1, 2021 and ends on Sep. 30, 2021.
Mar. 2022 Fourth Extension
On Mar. 8, 2022, IND RBI further extended the interest equalization scheme for pre and post shipment Rupee export credit, up to Mar. 31, 2024 or until a further review.
Telecom instruments’ sector having six HS lines shall be out of scope of the scheme, except for MSME manufacturer exporters, whom are subjects to revised rates.
Revised interest equalization rates are 3% for MSME manufacturer exporters exporting under any HS lines, and 2% for manufacturer and merchant exporters of 410 HS lines.
The extended scheme will not be available to those beneficiaries who are availing the benefit under any production linked incentive (PLI) scheme of the government.
From Oct. 1, 2021 to Mar. 31, 2022, banks shall identify the eligible exporters as per the scheme, and credit their accounts with the eligible amount of interest.
Banks will submit that sector-wise consolidated reimbursement claim by Apr. 30, 2022.
From Apr. 1, 2022, banks will reduce the interest rate charged to the eligible exporters upfront and submit the claims within 15 days from the end of the respective month.
All other provisions of the the interest equalization scheme remain unchanged.
May 2022 Performance Linked Incentive
On May 31, 2022, IND RBI issued clarification that the extended IES will also be available to such beneficiaries for segments other than for which they have availed.
Specifically those they have availed of production linked incentive (PLI) scheme.
Banks should obtain a self-declaration under the scheme from the exporters.
Provisions shall be deemed effective from Oct. 1, 2021.
Jun. 2023 IND FXA on Identification Number
On Jun. 1, 2023, IND FXA stated that exporters seeking benefits under the scheme are required to submit unique IES identification number (UIN), effective from May 1, 2023.
An acknowledgement generated through the directorate general of foreign trade consisting of a UIN, is valid for a financial year and is unique to a specific bank.
New UIN must be provided for each bank if a beneficiary benefits from multiple banks.
The directorate general of foreign trade also capped the maximum annual subvention amount per importer-exporter code holder INR 10 crore every financial year.
Feb. 2024 Notice of Extension, Modifications
On Feb. 22, 2024, IND RBI said IND GVT extended interest equalization scheme (IES) above, up to Jun. 30, 2024, and rate of interest equalization shall be as set out below.
2% for manufacturers and merchant exporters under specified 410 HS lines; and 3% to the micro, small, medium enterprises manufacturers exporting under any HS line.
From FY 2023-24, banks which have priced loans covered under IES at average rate of above repo rate plus 4% prior to subvention would be subjected to certain restrictions.
Based on an assessment undertaken for FY 2023-24, the Director General of Foreign Trade (the DGFT) will identify the banks which are in breach of the above provision.
It explained such banks shall be restricted from participating in the IES until they have furnished an undertaking, in the format as enclosed in the annex, to the DGFT.
Any further breach as assessed by DGFT thereafter may lead to debarment from IES.
As for the other modification, the annual net subvention amount has been already capped at INR 10 crore per importer-exporter code in a given financial year.
Accordingly, all disbursement from Apr. 1, 2023 shall be reckoned for this purpose.
This IND RBI notice (of Feb. 22, 2024) was issued to all scheduled commercial banks, excluding regional rural banks; all primary (urban) cooperative banks and state cooperative banks (scheduled banks having AD category-I license); and Exim Bank.
Aug. 2024 Extension
On Aug. 29, 2024, IND RBI notified of extension of Interest equalization scheme for pre and post shipment rupee export credit, from Jul. 1, 2024 up to Aug. 31, 2024.
From Jul. 1, 2024, only MSME manufacturer exporters are eligible under the scheme.
Interest equalization will be capped at INR 1.66 crore per importer-exporter code.
Sep. 2024 Further Extension, Clarification
On Sep. 20, 2024, IND RBI said IND GVT extended Interest equalization scheme for pre and post shipment rupee export credit, from Sep. 1, 2024, to Sep. 30, 2024.
However, the extension only applies to MSME manufacturer exporters.
Clarified that annual net subvention amount is capped at INR 10 Crore per importer-exporter code (IEC) for a financial year, with a specific cap of INR 5 crore for MSME manufacturer exporters until Sep. 30, 2024, for financial year starting Apr. 1, 2024.
For manufacturer and merchant exporters under the non-MSME category, the cap is INR 2.5 crore per IEC until Jun. 30, 2024, as per the government's trade notice.
Oct. 2024 Extend Scheme Further
On Oct. 9, 2024, IND RBI extended IES on pre and post shipment INR export credit for 3 months, until Dec. 31, 2024; fiscal benefits for MSMEs are capped at INR 50 lakhs.
MSME manufacturer exporters who have already availed benefits of INR 50 lakhs or more until Sep. 30, will not be eligible for further benefits during the extended period.
Regulators
IND FXA; IND RBI
Entity Types
Bank
Reference
Nt RBI/2024-25/80, DOR.STR.REC.45/04.02.001/2024-25, 10/9/2024; Nt RBI/2024-25/76, DOR.STR.REC.44/04.02.001/2024-25, 9/20/2024; Nt RBI/2024-25/71, DOR.STR.REC.41/04.02.001/2024-25, 8/29/2024; Nt RBI/2023024/124, DOR.STR.REC.78/04.02.001/2023024, 2/22/2024; PR, 6/1/2023; Nt RBI/2022-23/60, DOR.STR.REC.39/04.02.001/2022-23, 5/31/2022; Nt RBI/2021-22/180 DOR.STR.REC.93/04.02.001/2021-22, 3/8/2022; Nt RBI/2021-22/65, DOR.CRE(DIR).REC.28/04.02.001/2021-22, 7/1/2021; Cir RBI/2021-22/21, DOR.CRE.REC.06/04.02.001/2021-22, 4/12/2021; Cir RBI/2019-20/231, 5/13/2020; RBI/2018-19/107; PR, 11/29/2018; RBI/2018-19/81; RBI/2015-16/259; RBI/2015-16/322;
