RBI extends the assistance period for exporters
By Vaibhav Aggarwal
Apr 30, 2009
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India's central bank, Reserve Bank of India (RBI) steps forward to assist exporters hit by the falling global demand. RBI decides to extend concessional interest rate scheme offered to the sector by six months.

There is a cap at benchmark prime lending rate (BPLR) minus 2.5% on the interest rate of the pre-shipment rupee export credit up to 270 days and post-shipment credit up to 180 days. This facility was to expire on April 30th but the RBI has extended the date till October end.

In a circular issued to the scheduled commercial banks, RBI stated: "It has been decided to extend the validity ... up to October 31, 2009."

Since there is a cap on the interest rates, banks cannot charge exporters interest rate above the BPLR minus 2.5%.

Meanwhile the Federation of Indian Export Organisations has been asking the authorities to allow credit to exporters at 7% without linking it to the PLR.

The Indian export industry that registered a growth of over 30% during the first half year of the previous fiscal has been on a downside since October 2008. For the first time in five years, exporters witnessed a fall of 12.1% in their export during the month of October. Since then the Indian exports have continued to be bleak.

The exporters have been hit hard by the slowdown in the major markets of the US, Europe and the Middle East. Over 70% of India's overseas sales are done in these markets.

At the same time the government has also extended 2% interest rate subsidy to the exporters. The subvention was earlier provided until March 31st but the UPA government has extended the period till December 31st 2009 in order to boost up the economy.


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