Wed, 12 Oct 2011 08:57:33 GMT

2% interest subsidy for export credit

To cover rupee-denominated credit for SMEs, others.

To cushion the global slowdown's impact on exporters, the Reserve Bank on Tuesday announced a two per cent interest subsidy on rupee export credit for handicrafts, handlooms, carpets and small and medium enterprises (SMEs).

Exporters in these segments would be eligible for the interest subvention to be available up to March 31, 2012, the RBI said.

Banks may reduce the interest rate for export credit according to the base rate system by the amount of subvention available, subject to a minimum rate of seven per cent. Banks must ensure the the scheme's benefits are passed on completely to the eligible exporters. The subvention will provide some relief to exporters suffering from a demand slowdown. They are also facing the adverse effects of an interest rate rise of 200-250 basis points in the past 14 months. Rising input costs due to rupee depreciation and high commodity prices have also hurt.

An Allahabad Bank executive said to begin with, the RBI had extended the subsidy benefit to only four sectors. But, looking at the widespread effects of weak demand, industry bodies may seek coverage of more sectors.

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