The move will make interest rates even more competitive internationally. This will encourage exporters to avail foreign currency loans. Exporters can avail of pre-shipment and post-shipment credit in foreign currency from banks.
RBI also directed banks, located in areas with concentration of exporters, to give this facility due publicity and make it easily accessible to all exporters, including small exporters.
As exporters are eligible to sell their export earnings in the forward market, taking into account the forward premia, the effective interest cost to exporters becomes only two to three per cent, which is internationally highly competitive.
The RBI also directed banks to report to it the maximum and minimum lending rates to exporters, with effect from the fortnight beginning June 15, 2002. This will ensure greater transparency and also encourage banks to continue to provide finance at competitive rates. This information will be placed in public domain.
There is a proposal to deregulate the present ceiling on interest rate on export credit for domestic currency. Linking of domestic interest rates on export credit to PLR has become redundant in the present circumstances, when the effective interest rates are in any case substantially lower than the PLR for exporters. The RBI said that the proposal would be considered after further consultations.
Banks have also been asked to widely publicise the concessionality in the interest rates for deemed exports and make these available to all eligible exporters. Some exporters have represented that they still did not get the advantage of the concessional rate of interest in the case of deemed exports.
As per the RBI guidelines, banks are permitted to extend rupee pre-shipment and post-supply rupee credit at concessional rate of interest to parties against oders for supplies in respect of deemed exports. Such rupee export credits, both at pre-shipment and post-supply stages, are eligible for refinance from RBI.