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UCBs asked to charge less for exporters

NEW DELHI: Seeking to address the issues raised by exporters and help them fight the global recession and economic slowdown, the Reserve Bank of India (RBI) has asked urban cooperative banks to charge two percentage points less interest for credit to exporters engaged in sectors such as textiles and gems and jewellery.

Besides giving relief to the textiles and gems and jewellery sectors, exporters who will get funds at lesser interest rates from urban cooperative banks (UCBs) are handicrafts, carpets, leather, marine products, and small and medium enterprises. “The Government has decided to extend interest subvention of two percentage points from June 1, 2009, till September 30, 2009 on pre- and post-shipment rupee export credit extended by scheduled UCBs, holding AD category I licences, for certain employment-oriented export sectors,” the notification states.

Under the existing norms, UCBs are permitted to determine their own lending rates with the approval of their boards.

The initiative is aimed at boosting exports which have been declining since October 2008.

However, the total subvention will be subject to the condition that the interest rate, after subvention will not fall below 7 per cent and banks are to ensure that the benefit of the subvention is passed on completely to the eligible exporters.

The amount of subvention will be calculated on the amount of export credit from the date of disbursement up to the date of repayment or up to the date beyond which the outstanding export credit becomes overdue, it added.

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