RBI asks banks to start implementing export package

MUMBAI: The Reserve Bank on Saturday directed all commercial banks to reduce interest rates on export finance by two percentage points following government's decision to grant subsidy to exporters hit hard by rise in rupee value.

RBI notified that two percentage points interest subsidy should be given to nine sectors - textiles, leather products, readymade garments, handicrafts, engineering products, sports goods, processed agriculture products, marine items and toys.

The benefit would extend to small and medium exporterswhose investment in plant and machinery does not exceed Rs 10 crore.

Now, credit to these categories of exporters will be available at 4.5 per cent less than the prime lending rate, which is in the range of 12 per cent. Earlier, the difference was 2.5 per cent.

This rate will apply to pre-shipment and post-shipment credit disbursed between April and December 2007.

The subsidy of two per cent would be borne by the central government, which early this announced a Rs 1,400 crore package for exporters feeling the pinch after the Indian currency rose nearly nine per cent against the dollar since the beginning of 2007.