Mumbai, Aug 27 (KNN) The Reserve Bank of India (RBI) has increased the rate of interest subvention from two to three per cent on pre and post-shipment rupee export credit for certain employment oriented export sectors with effect from August-1, which also includes small and medium enterprises (SMEs).

“The Government of India has decided to increase the rate of interest subvention on the existing sectors from the present two per cent to three per cent with effect from August 1, 2013,” said RBI here.

The sector includes handicrafts, carpets, handlooms, readymade garments, processed agriculture products, sports products, toys, SMEs etc.  

Further, RBI has asked banks to reduce the interest chargeable on exporters according to the base rate system eligible in the existing sectors for export credit subvention, subject to a floor rate of seven per cent.

“Banks may ensure to pass on the benefit of three per cent interest subvention completely to eligible exporters,” it said.

Meanwhile, RBI has widened the interest subvention scheme to textiles goods which includes blankets, sacks, bags, curtains etc.  It also widened it for additional 101 tariff lines in the engineering goods sector apart from 134 items in May 2013.  

Interest rate subvention on export credit allows an exporter to source cheaper loans for manufacturing goods for overseas clients.

This adds to the price competitiveness of Indian goods, which is essential to maintain market share in international markets at a time when global demand for goods is declining due to the ongoing global slowdown. (KNN/GUNJ)