IECD.No. 47/3840/04.02.01/97-98

June 11, 1998
(Saka)

The Chairmen/Chief Executives of commercial banks

Dear Sir,

Export Credit

As an additional measure of support to step up the rate of growth of exports, it has been decided to extend to exporters credit under a special facility. This facility is temporary and would be available upto December 31, 1999. It would not be renewed beyond this period. Under the facility, banks should provide exporters rupee credit at 6.5 per cent per annum effective June 12, 1998 for their exports over and above the level acheived during the financial year April 1997- March 1998. The interest rate at 6.5 per cent per annum would be available foe pre-shipment rupee credit upto a period of 180 days and post-shipment rupee credit upto a period of 90 days. A copy of the directive DBOD.No. Dir. BC. 5/13.03.00/98 dated June 11 , 1998 issued in this regard is enclosed. The interest rate applicable in respect of other export credit would continue to be as indicated in our circular IECD.No.41/04.02.01/97-98 dated April 29, 1998.

2. Financing banks are advised to obtain satisfactory documentary evidence, and keep it on their records, regarding the level of exports achieved by the exporter during the period April 1997-March 1998 and to ensure that only the 'incremental' export is financed under the special facility.

3. Rupee export credit provided under the special facility will be eligible for refinance by RBI at interest rate of 4 per cent per annum to the extent of 100 per cent of such credit. The detailed instructions regarding Export Refinance are being issued by RBI separately.

4. Banks have been authorised to grant export credit in foreign currency, at rates No. EFD.14/04.02.11/93-94 dated 6th Oct. 1993 EFD, linked to LIBOR, vide instructions contained in circulars IECD. 21/04.02.15/93-94 dated 8th November 1993 and 10/04.02.15/94-95 dated 3rd September 1994. Banks meet the requirements of export credit in foreign currency mainly from their FCNR(B) etc. funds. In the light of this position and with a view to enabling exporters to access export credit in foreign currency more effectively at internationally competitive rates, it has been decided that banks should charge a spread of not more than 1.5 per cent over LIBOR (excluding withholding tax) as against 2/2.5 per cent over LIBOR presently permitted to be charged.

5. Exporters and their representative bodies have been frequently representing to the Reserve Bank that exporters do not get credit limits/enhancement in credit limits sanctioned in time. They have also been representing to the Reserve Bank that collateral security is being insisted upon by banks before considering request for enhancements in credit limits. Reserve Bank is keen to ensure that all its measures according primacy and importance to export credit with a view to achieving export growth are fully supported at the level of banks through suitable guidelines ensuring adequate delegation of powers and sanction of need-based and timely credit. Exporters have the option to avail themselves of export credit either in rupee or foreign currency. It should, therefore, be possible for exporters to avail of export credit in foreign currency when they choose to do so without experiencing any difficulty or delay at the branches of banks. Banks are, therefore, advised to review all aspects of their internal guidelines/procedures immediately to achieve the above objective.

Yours faithfully

(A. Chandramouliswaran)

Chief General Manager