Interest Equalisation Scheme, Objective, Features, Eligibility

Context

• Engineering Export Promotion Council (EEPC) India has urged the government to restore the interest subvention scheme for all exporters and raise the benefits offered to micro, small and medium enterprises (MSMEs).
• Benefits under the Interest Equalisation Scheme expired last month for all exporters, except MSMEs, which received a two-month extension.

About Interest Equalisation Scheme

• Implementation: First implemented on April 1, 2015.
• Purpose: To provide pre- and post-shipment export credit in rupees to exporters.
• Validity: Initially valid for 5 years up to March 31, 2020.
  • Continued thereafter, with extensions during COVID-19 and further extensions and fund allocations.
• Implementing Agency: Implemented by the Reserve Bank of India (RBI) through various public and non-public sector banks providing pre- and post-shipment credit to exporters.
• Monitoring: Jointly monitored by the Directorate General of Foreign Trade (DGFT) and the RBI through a consultative mechanism.
• Objective: Helps identified export sectors remain internationally competitive and achieve high export performance.
• Eligibility: Eligible exporters must submit certification from an external auditor to the concerned bank to claim benefits.

Features of Interest Equalisation Scheme

• Reimbursement Process: Banks provide IES benefits to eligible exporters and claim reimbursement from the RBI based on the external auditor certification.
• Interest Equalisation Benefits:
  • Provides 2% interest equalisation on pre- and post-shipment rupee export credit to merchant and manufacturer exporters of 410 identified tariff lines.
  • Provides 3% interest equalisation to all MSME manufacturer exporters.
• Funding Limits: The scheme is now fund-limited with a benefit cap of ₹10 Crore per annum per IEC (Import Export Code).
• Bank Lending Conditions: Banks lending to exporters at an average rate exceeding Repo + 4% are debarred under the Scheme.

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