What changed
This is a consolidation of all ECR instructions issued up to June 30, 2011, replacing the previous master circular of July 1, 2010. No new policy changes were introduced; the circular merely updates and compiles existing guidelines.
What it means for you
Banks can continue to access ECR at the prevailing repo rate, with a limit of 15% of eligible export credit. The facility remains a key liquidity tool for export financing, with strict penalties for irregular usage. No margin requirement reduces cost for banks.
What you must do
- Ensure your bank's eligible export credit data is accurately reported to calculate the 15% refinance limit.
- Maintain proper documentation including the stamped agreement (Form DAD 297), DPN (Form DAD 295A), and Board Resolution (Form DAD 298).
- Monitor ECR usage to avoid exceeding limits or exceeding 180-day repayment period to prevent penal interest.
- Review reporting formats in Annex III for compliance with RBI submission requirements.
Who it affects
All scheduled banks (excluding RRBs) that are authorized dealers in foreign exchange, Banks extending pre-shipment and post-shipment export credit, Treasury and credit departments managing refinance availed from RBI
What is the interest rate on export credit refinance?
The interest rate is the Repo Rate under the Liquidity Adjustment Facility (LAF), as announced by RBI from time to time. Interest is calculated on daily balances and debited monthly.
What happens if we do not repay the refinance within 180 days?
Non-repayment within 180 days is considered irregular availment. RBI will charge a penal rate of interest on the outstanding amount, as decided from time to time.
Is any collateral required for this facility?
No collateral is required. RBI extends the facility against a Demand Promissory Note (DPN) supported by a declaration that the bank has extended eligible export credit.