The Reserve Bank of India has directed that the pricing of interest rates on export loans would be freed with effect from 1st July 2010. With this the RBI has indicated an end to the concessional interest rates that were offered to exporters on export loans.

This is a cause of worry for exporters who are already facing the downside of an appreciating currency. Banks have however assured that there would not be a huge change in the pricing of loans with the new regime coming into play.

This move has however tensed the exporters. The Federation of Indian Export Organisation president A Sakthivel said that the federation has given a written application to the Finance Ministry as well as the Ministry of Commerce that the new move by RBI is not going to help exporters.

Till now, the interest rates on these loans were marked at 250 basis points below the BPLR. With base rate coming into play from 1st July, RBI has said that banks can price these loans at the base rate or even above it.

The exporters have proposed that the export loans should be priced at 2.5% below the base rate.

RBI has so long been very protective towards exporters. It has directed that 10% of the total credit for both public as well as private sector banks should comprise of export loans.

Banks are still saying that the new directive would not harm the exporters. "For several years, RBI regulated interest rate that can be charged to exporters. Now that the minimum rate that can be charged is minimum so that banks bear in lending, the rate has been deregulated," said a senior banker from a public sector bank.