Export credit, refinance rates up from April

MUMBAI, MAR 3: The Reserve Bank of India has cut the export credit refinance rates by 100 basis points to 7 per cent (one percentage poin...

MUMBAI, MAR 3: The Reserve Bank of India has cut the export credit refinance rates by 100 basis points to 7 per cent (one percentage point below bank rate). However, the new rate will be applicable up to March 31 and from April, the refinance rate will be linked to the bank rate, thereby raising it to 8 per cent, an RBI circular issued on March 1 said.

The central bank is also hiking export credit rates for both pre-shipment as well as post-shipment credit from April 1, a monetary policy department note said. Up to March 31, export credit will continue to be availed of at the existing levels.

"With effect from April 1, 1999, the interest rates on export credit will stand revised," the circular says.

At present, banks are offering pre-shipment credit up to 180 days at 9 per cent and beyond 180 to 270 days at 12 per cent. These rates are applicable up to March 31.

From April 1, pre-shipment credit will be available to exporters at 10 per cent while beyond 180 days to 270 days the rate applicable is 13per cent. Credit against incentives receivable from the Government covered under the ECGC guarantee up to 90 days will be revised to 10 per cent from 9 per cent on April 1.

As far as post-shipment credit goes, the central bank will revise rates effective April 1. The rate on demand bills for the period for post-shipment credit will not exceed 10 per cent instead of 11 per cent.

For usance bills, exporters will get credit at rates not exceeding 10 per cent — up from 1 per cent up to March 31, 1999. For the bills beyond 90 days and up to six months from the date of shipment the rate has been fixed at 12 per cent from April 1 — up from 11 per cent till March 31, 1999.

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The move to hike export credit is in line with the RBI’s policy to make exports competitive. The central bank had reduced the rates on August 6 last year in a bid to make domestic interest rates unattractive for exporters and thus forcing exporters to remit their forex earnings. This was done to shore up the rupee.

On Sunday, the RBIrevamped the export credit schemes in foreign currency at internationally competitive rates where the central bank has simplified the procedures for exporters. Subsequently, it set a committee of bankers to look into exports.

The central bank has advised banks that in case of established exporters having satisfactory track record, they can consider sanctioning "line of credit" for a longer period, say three years, with an in-built flexibility to step up or step down the quantum of limits within the overall outer limits assessed.