The Commerce Ministry is considering a 5-year extension to the interest equalization scheme, buoyed by the positive response from exporters.
Government sources confirm that extending the interest equalization scheme on pre- and post-shipment rupee export credit aims to support outbound shipments. Sources added that an evaluation of the scheme is underway, and any further decision will hinge on the evaluation report’s outcome.
The interest equalisation scheme for exporters is scheduled to conclude on June 30, 2024.
From April 2023 to November 30, 2024, the government disbursed ₹2,641 crore out of the allocated budget of ₹2,932 crore under the scheme. Disbursements totalled ₹3,118 crores in 2022-23 and ₹3,488 crore in 2021-22.
The interest equalization scheme supports exporters from identified sectors and MSME manufacturers in accessing export credit in rupees at competitive rates, which holds significance amid prevailing global challenges.
On December 8, 2023, the Union Cabinet approved an additional allocation of ₹2,500 crore to sustain the scheme. This allocation supplements the initial outlay of ₹9,538 crore under the scheme, aimed at bridging the funding gap until June 2024.
Launched on April 1, 2015, the scheme was initially valid for 5 years until March 31, 2020, and has since been extended with additional funding.
Currently, the scheme offers an interest equalization benefit of 2% on pre- and post-shipment rupee export credit to merchant and manufacturer exporters of 410 identified tariff lines, and 3% to all MSME manufacturer exporters.
These sectors encompass leather, carpets, handicrafts, fabrics, and readymade garments.
Now operating as a fund-limited scheme, its benefits for individual exporters are capped at ₹10 crore annually per Import Export Code ( IEC ). Banks charging exporters an average rate exceeding repo+4% are ineligible under the scheme.
Implemented by the Reserve Bank of India (RBI) through various banks providing pre- and post-shipment credit to exporters, the scheme is jointly monitored by the Directorate General of Foreign Trade (DGFT) and RBI.
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