What changed
The Government of India decided to continue the 2% interest subvention scheme on rupee export credit for another year, from April 1, 2011 to March 31, 2012, covering the same employment-oriented sectors as before. Banks are now required to apply the subvention under the Base Rate system, ensuring the interest rate charged to eligible exporters is reduced by 2%, subject to a minimum floor rate of 7%.
What it means for you
For banks, this means they must adjust their lending rates on rupee export credit for the specified sectors to reflect the subvention, while maintaining compliance with the Base Rate system. Lenders need to ensure that the full 2% benefit is passed on to exporters, and they must follow a structured quarterly claim process with external auditor certification to get reimbursed from RBI.
What you must do
- Reduce interest rates on rupee export credit for handicrafts, handlooms, carpet, and SME sectors by 2% below Base Rate, with a floor of 7%.
- Ensure full pass-through of the subvention benefit to eligible exporters and maintain documentation.
- Submit quarterly claims for subvention reimbursement to RBI using the prescribed format, accompanied by an external auditor's certificate.
- Verify that all eligible export credit advances are at or above Base Rate before applying the subvention.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Exporters in handicrafts, handlooms, carpet, and SME sectors, Bank branches handling export credit
What is the floor rate for rupee export credit under this subvention?
The interest rate after applying the 2% subvention cannot go below 7% per annum.
How do banks claim the subvention from RBI?
Banks must submit quarterly claims in the specified format to RBI's Central Office, along with an external auditor's certificate certifying the claim amount.
Which sectors are covered under this extended subvention scheme?
The scheme covers handicrafts, handlooms, carpet, and Small and Medium Enterprises (SMEs) as defined in the annex.