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Interest Equalization Scheme (IES) on Pre and Post Shipment Rupee Export Credit

Government of India has allowed extension of Interest Equalization Scheme (IES) on pre and post shipment rupee export credit.

From when is Interest Equalization Scheme (IES) applicable?

Government of India had announced the Interest Equalisation Scheme (IES) on pre and post shipment rupee export credit effective from April 01, 2015. IES was initially valid for 5 years up to March 31, 2020 and has been continued thereafter with further extensions and fund allocations.  

Government of India has now allowed for extension of IES up to June 30, 2024.

How is IES implemented?

IES is implemented by Reserve Bank of India (RBI) through various banks who provide pre and post shipment credit to the exporters. IES is jointly monitored by Director General of Foreign Trade (DGFT) and RBI through a consultative mechanism. 

What are the benefits of IES?

  • IES helps eligible exporters to avail pre and post shipment rupee export credit at competitive rates. This enables them to compete internationally and helps in growth of exports. 
  • IES is primarily meant for the labour intensive sectors. Increase in exports from such sectors leads to generation of employment in the country.

What are the interest equalisation rates under IES?

Category of Exporters Rate of interest Equalisation
Manufacturer and merchant exporters exporting products listed in the 410 tariff lines 2%
MSME exporters of any tariff line 3%

How shall the IES benefit be extended by banks?

The banks shall reduce the interest rate charged to the eligible exporters upfront while extending pre and post shipment rupee export credit.

What are the recent modifications in IES?

  • With effect from FY 2023-24, the banks which have priced the loans covered under IES at an average interest rate of greater than Repo Rate + 4% prior to subvention would be subjected to certain restrictions under IES till they furnish an undertaking to DGFT. Any further breach as assessed by DGFT thereafter may lead to debarment from IES.
  • The net subvention amount (i.e. benefit to exporters) has been capped at ₹10 crore per annum per Importer-Exporter Code (IEC). 

(Updated on August 29, 2024)

  • IES has been extended from July 1, 2024 to August 31, 2024.
  • With effect from July 1, 2024, only MSME manufacturer exporters would be eligible under IES. Hence, the Scheme benefits will not be available to non-MSME exporters beyond June 30, 2024.
  • The interest equalization will be capped at ₹1.66 crore per IEC for the extended period of the scheme.

(Updated on September 20, 2024)

  • IES has been extended from September 1, 2024 to September 30, 2024.
  • The extension is applicable only for MSME Manufacturer exporters.
  • The annual net subvention amount is capped at ₹10 crore per IEC for a given financial year, accordingly a cap of ₹5 crore per IEC for MSME Manufacturer exporters is imposed till September 30, 2024, for the financial year starting from April 1, 2024.
  • For Manufacturer Exporters and Merchant Exporters under the non-MSME category, the cap shall be ₹2.5 crore per IEC till June 30, 2024.

(Updated on October 09, 2024)

IES has been extended from October 1, 2024 to December 31, 2024, with the following modifications to the Scheme –

  • Fiscal benefits of each MSME, on aggregate, will be restricted to ₹50 lakhs for the Financial Year 2024-25 till December 31, 2024.
  • Accordingly, MSME manufacturer exporters who have already availed equalisation benefits of ₹50 lakhs or more in the Financial Year 2024-25 till September 30, 2024, will not be eligible for any further benefit in the extended period.


References

Government of India. (2015, December 01). 'Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit'. Retrieved from https://rbidocs.rbi.org.in/rdocs/content/pdfs/257IES04122015_AN.pdf

Government of India. (2023, December 08). 'Cabinet approves Additional allocation of Rs 2500 crore for continuation of Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit till 30.06.2024'. Retrieved from https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1984213

Reserve Bank of India. (2015, December 01). 'Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10159&Mode=0

Reserve Bank of India. (2016, February 11). 'Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10281&Mode=0

Reserve Bank of India. (2018, November 29). 'Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11421&Mode=0

Reserve Bank of India. (2019, January 11). 'Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11453&Mode=0

Reserve Bank of India. (2020, May 13). 'Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit- Extension'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11887&Mode=0

Reserve Bank of India. (2021, July 01). 'Interest Equalization Scheme on Pre and Post Shipment Rupee Export Credit - Extension'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12124&Mode=0

Reserve Bank of India. (2021, April 12). 'Interest Equalization Scheme on Pre and Post Shipment Rupee Export Credit- Extension'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12075&Mode=0

Reserve Bank of India. (2022, May 31). 'Interest Equalization Scheme (IES) on Pre and Post Shipment Rupee Export Credit - Extension'. Retrieved from https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12327&Mode=0

Reserve Bank of India. (2022, March 08). 'Interest Equalization Scheme on Pre and Post Shipment Rupee Export Credit - Extension'. Retrieved from https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12252&Mode=0

Reserve Bank of India. (2024, February 22). 'Interest Equalization Scheme (IES) on Pre and Post Shipment Rupee Export Credit'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12610&Mode=0

Reserve Bank of India. (2024, August 29). 'Interest Equalization Scheme (IES) on Pre and Post Shipment Rupee Export Credit'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12729&Mode=0

Reserve Bank of India. (2024, September 20). 'Interest Equalization Scheme (IES) on Pre and Post Shipment Rupee Export Credit'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12734&Mode=0

Reserve Bank of India. (2024, October 09). 'Interest Equalization Scheme (IES) on Pre and Post Shipment Rupee Export Credit'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12738&Mode=0


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