Interest Equalisation Scheme

Interest Equalisation Scheme

Context: The Department of Commerce has extended the Interest Equalisation Scheme for pre- and post-shipment rupee export credit for Micro, Small and Medium-scale (MSME) exporters till August 31. 

About Interest Equalisation Scheme:

Implementation Date:

• The scheme was first implemented on 1st April 2015 to provide pre- and post-shipment export credit to exporters in rupees.

Validity:

• Initially valid for 5 years up to 31st March 2020. It has been continued thereafter, including extensions during the COVID-19 pandemic and further fund allocations.

Implementing Agency:

• The scheme is implemented by the RBI through various public and non-public sector banks that provide pre- and post-shipment credit to exporters.
Monitoring:
• Jointly monitored by the Directorate General of Foreign Trade (DGFT) and the RBI through a consultative mechanism.

Objective:

 The scheme aims to help identified export sectors be internationally competitive and achieve a high level of export performance.

Features:

Eligibility Certification: An eligible exporter must submit certification from an external auditor to the concerned bank to claim this benefit.

IES Benefits: Banks provide IES benefits to eligible exporters and claim reimbursement from the RBI based on the external auditor certification provided by the exporter.

Interest Equalisation Benefit: The scheme offers an interest equalisation benefit at a rate of 2% on pre- and postshipment rupee export credit to merchant and manufacturer exporters of 410 identified tariff lines at the 4-digit level, and 3% to all MSME manufacturer exporters.

Fund Limitation: The scheme is now fund-limited, with the benefit to individual exporters capped at Rs 10 Crore per annum per IEC (Import Export Code).

Bank Rate Cap: Banks’ lending to exporters at an average rate of more than Repo + 4% are debarred under the scheme.