RBI increases interest subsidy for MSME sector exporters from 3 percent to 5 percent

November 30, 2018

In order to boost MSME growth and exports, the Reserve Bank of India on Thursday said it has increased interest subsidy on post and pre-shipment export credit to five percent from three percent. Under this, exporters get subsidy as part of the Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit, applicable since November 2, 2018.

In a notification, the central bank said, “It has been decided by the Government of India to increase w.e.f. November 2, 2018 Interest Equalisation rate from 3 percent to 5 percent with respect to exports by the Micro, Small & Medium Enterprises (MSME) sector manufacturers under the Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit.”

Initially, the scheme was called Interest Subvention Scheme, which was targeting exports of MSME and 416 tariff lines. It primarily covers labour-intensive and employment-generating sectors such as processed agriculture/food items, handicrafts, readymade garments, glass and glassware, medical and scientific instruments, auto components/parts, etc.

The RBI also announced that it has relaxed guidelines for NBFCs on securitisation transactions to encourage them to securitise eligible assets. The bank said, “It has been decided to relax the Minimum Holding Period (MHP) requirement for originating NBFCs, in respect of loans of original maturity above five years, to receipt of repayment of six monthly instalments or two quarterly instalments”.

The notices come almost a month after Prime Minister Narendra Modi unveiled several initiatives to enhance credit access and boost employment for MSMEs at the launch of the MSME Support and Outreach Programme. It was announced that the government has decided to increase interest subvention on pre and post shipment credit.

At the event, Modi had said, “If agriculture is the backbone of India's economy, then MSMEs are taking the economy to newer heights.”

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