The government of India has approved the extension of the Interest Equalization Scheme for pre and post-shipment Rupee export credit, with the same scope and coverage, for one more year i.e. up to March 31, 2021. On Thursday (March 13), RBI in its notification to all Scheduled Commercial Banks (excluding RRBs), Small Finance Banks, Primary (Urban) Cooperative Banks, and EXIM Bank said that the extension shall take effect from April 01, 2020, and end on March 31, 2021, covering a period of one year. The interest Equalisation Scheme (IES) came into effect from 01.04.2015 for a period of 5 years being implemented through DGFT. Consequent to Government announcement the extant operational instructions issued by the RBI under the captioned Scheme shall continue to remain in force up to March 31, 2021. The scheme was earlier called ‘interest subvention scheme’ which was in existence between August 2010 and 31.03.2015.
The Scheme is available to all MSME exporters under 416 tariff lines under Indian Trade Clarification (ITC)- Harmonized System (HS) Codes of 4 digits and exports made by MSMEs across all ITC(HS) codes. It means all MSME exporters including merchant exporters are eligible for Interest Equalisation rate from 3% to 5% in respect of exports from the date of disbursement up to the date of repayment or up to the date beyond which the outstanding export credit becomes overdue during the period of scheme in force. The scheme is beneficial to labour intensive and employment generating manufacturing sectors like sectors such as textiles, engineering and leather that do exports of their goods. The manufacturing activities like processed agriculture/food items, handicrafts, handmade carpet (including silk), handloom products, coir and coir manufacture jute raw and yarn, readymade garments, Fabrics of all types, toys, sports goods, paper and stationery, cosmetics, toiletries, leather goods and footwear, ceramics, glass and glassware, medical and scientific instruments, optical frames, lenses, sunglasses, auto components industrial machinery, electrical and engineering items, etc. manufactured by SMEs are covered under the scheme.
Under the scheme, Banks are required to reduce the interest rate charged to the eligible exporters as per RBI’s extant guidelines on interest rates on advances by the rate of interest equalisation provided by the Government of India. The consolidated monthly reimbursement claims along with an External Auditor’s Certificate (with stamp and membership number) certifying that the claim for interest equalization amount shall be submitted to the Chief General Manager, Department of Banking Regulation, Reserve Bank of India, Central Office, Shahid Bhagat Singh Marg, Fort Mumbai – 400 001. The reimbursement of interest equalisation claim will be made by RBI as and when the funds are received from the Government of India.