RBI lowers interest rate ceiling on new export credit by 150 bps

The Reserve Bank of India (RBI) has reduced the ceiling rate for new export credit in foreign currency by banks to LIBOR plus 200 basis points from the present ceiling rate of LIBOR plus 350 basis points with immediate effect.

The ceiling interest rate on the lines of credit with overseas banks has also been reduced from six months LIBOR/Euro, LIBOR/Eurobor plus 150 basis points to six months LIBOR/Euro LIBOR/Euribor plus 100 basis points with immediate effect.

This, the RBI said, has been done in consultation with the Government of India and on the express condition that the banks will not levy any other charges, viz, service charge, management charge etc except for recovery towards out of pocket expenses incurred.

Banks can charge interest not exceeding 200 basis points over LIBOR/ Euro LIBOR/ Euribor for pre-shipment credit for up to 180 days.

Beyond 180 days and up to 360 days banks may charge the rate for initial period of 180 days prevailing at the time of extension plus 200 basis points.
 
For post-shipment credit on demand bills for transit period (as specified by FEDAI), RBI has asked banks to charge a rate not exceeding 200 basis points over LIBOR/ Euro LIBOR/ Euribor.
 
For usance bills (comprising usance period of export bills, transit period as specified by FEDAI and grace period wherever applicable) for up to six months from the date of shipment, RBI said, the rate should not exceed 200 basis points over LIBOR/ Euro LIBOR/ Euribor.
 
For export bills (demand or usance) realised after due date but up to date of crystallisation, the rate has also been set at the above level.
 
For export credit not otherwise specified (ECNOS) and are rupee credit, banks are free to decide the rate of interest rate keeping in view the BPLR and spread guidelines, RBI said.
 
RBI has asked banks to make similar changes in interest rates in cases where Euro Libor/Eurlibor has been used as the benchmark.

The revision in the rates of interest would be applicable only to fresh advances, RBI said.