INTEREST EQUALISATION
SCHEME - ECONOMY
News: Govt evaluating usefulness of
interest equalisation scheme in promoting exports
What's in the news?
●
The Union Cabinet has approved an additional
allocation of Rs 2500 Cr for continuation of the Interest Equalisation Scheme till
30th June 2024.
Interest Equalisation
Scheme:
●
The government of India had announced the Interest
Equalisation Scheme on Pre and
Post-Shipment Rupee Export Credit to eligible
exporters.
●
The Scheme started on April 1, 2015, and was
initially valid for 5 years.
Interest Rate:
●
The rate of interest equalisation @ 3% per annum
was available on Pre Shipment Rupee Export Credit and Post Shipment Rupee
Export Credit.
Features of the Scheme:
●
The scheme would
not be available to merchant exporters. Government, however, reserves the
right to modify/amend the Scheme at any time.
●
Banks are required to completely pass on the
benefit of interest equalisation, as applicable, to the eligible exporters upfront and submit the claims to RBI
for reimbursement, duly certified by the external auditor.
●
The Scheme was
not fund-limited and extended the benefit without any limit to all exporters.
Implementation:
●
The scheme shall be implemented by RBI through various Public and non-public Sector
banks that provide pre and post-shipment credit to the exporters.
●
The Scheme is jointly monitored by DGFT (Directorate General of Foreign Trade) and RBI
through a consultative mechanism.
Recent Extensions in the
Scheme:
●
The government of India has approved the extension
of the Interest Equalization Scheme for Pre and Post-Shipment Rupee Export
Credit (‘Scheme’) up to March 31, 2024,
or till further review, whichever is earlier.
●
Currently, the Scheme provides an interest equalisation benefit at the rate
of 2% on pre and post-shipment Rupee export credit to merchant and
manufacturer exporters of 410 identified tariff lines at 4 digit level and 3%
to all MSME manufacturer exporters.
●
The Scheme has now
been made fund-limited, and benefits to individual exporters have been
capped at ₹10 Crore per annum per IEC (Import Export Code).