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Last updated: August 3rd, 2021 9:48 AM

RBI extends Interest Equalization Scheme for Exporters

On account of the prevailing lockdown in India for the COVID-19 pandemic and to provide relief to exporters, RBI extends the Interest Equalization Scheme for Pre and Post Shipment Rupee Export Credit for a further period of three months, i.e., up to September 30, 2021. Exporters get the subsidy under the ‘Interest Equalization Scheme for pre and post-shipment Rupee Export Credit’. The extension takes effect from July 1, 2021, and ends on September 30, 2021.

Synopsis of Notification

As mentioned above, the RBI has extended the validity of the interest equalization scheme for pre-and-post-shipment rupee export credit by three months.
  • The extension of the interest equalization scheme for Pre & Post Shipment Rupee Export Credit stays still with the same scope and coverage
  • Consequently, the extent operational instructions issued by the Reserve Bank of India will continue to remain in force up to September 30, 2021.

Earlier Extension

The scheme was effective from 1st April 2015 for five years. The interest equalization scheme was announced for a period of five years in the Foreign Trade Policy (2015-20). The scheme was effective from 1st April 2015 for five years. However, as part of the relief measures announced during the COVID-19 lockdown, the government has extended the scheme for the interest rate on pre and post-shipment rupee export credit. Earlier in April, the scheme was extended till June 30, 2021

Interest Equalization Scheme for Pre and Post-Shipment Export Credit

As part of the Interest Equalization Scheme, a rebate of interest is provided to exporters on pre and post-shipment export credit like packing credit. An eligible exporter has to submit a certification of the external auditor to the concerned bank to claim this benefit. Banks provide benefits to the eligible exporters and claim a reimbursement of the same from the Reserve Bank of India based on the external auditor certification furnished by the exporter. The scheme helps the identified export sectors to be internationally competitive and to achieve a higher level of export performance.

Rate of Equalization

At the time of the introduction of the scheme the rate of subvention was fixed at 3% and the rates for MSME sectors have been increased to 5% with effect from 2nd November 2018. The rate for a large manufacturer and Merchant exporters remains at 3%. Have a look at the below table for a better understanding of the eligible category and equalization rate.
Sl.No Export Items Eligible Category Rate of Equalization
1 The 416 four-digit tariff lines listed in the scheme Large sector manufactures from 01.02.2015 and Merchant exporters from 02.01.2019 3% per annum
2 All tariff lines MSME units Manufacture 5% per annum
To read detailed information on interest calculation, half-yearly claims, nodal agency click here.

Procedure for Claiming Reimbursement

According to this credit Scheme, the banks will identify the eligible exporters and credit the beneficiaries’ accounts with the eligible amount of interest equalization. After that, concerned banks will reduce the interest rate charged to the eligible exporters on advances by the rate of interest equalization provided by the Government.   Click here to know more about the Interest Equalization Scheme