Interest Equalisation Scheme

01.07.2024

Interest Equalisation Scheme

Why in the news?                                                                                                                                                                                                                                      The Department of Commerce has extended the Interest Equalisation Scheme for pre- and post-shipment rupee export credit for Micro, Small and Medium-scale (MSME) exporters till August 31.

About Interest Equalisation Scheme:

• It was first implemented on 1st April 2015, to provide pre- and post-shipment export credit to exporters in rupees.
• It was initially valid for 5 years, up to 31.3.2020. The scheme has been continued thereafter, including a one-year extension during COVID and further extensions and fund allocations.
• Implementing agency: It is being implemented by the RBI through various Public and non-Public Sector banks that provide pre- and post-shipment credit to the exporters.
• The Scheme is jointly monitored by the Directorate General of Foreign Trade (DGFT) and the RBI through a consultative mechanism.
• The scheme helps the identified export sectors to be internationally competitive and to achieve a high level of export performance.

Features of the Interest Equalisation Scheme:

• An eligible exporter has to submit a certification from the external auditor to the concerned bank to claim this benefit.
• Banks provide IES benefits to the eligible exporters and claim a reimbursement from the RBI based on the external auditor certification furnished by the exporter.
• Currently, the Scheme provides an interest equalization benefit at the rate of 2% on pre- and post-shipment rupee export credit to merchant and manufacturer exporters of 410 identified tariff lines at 4-digit level and 3% to all MSME manufacturer exporters.
• The Scheme has now been made fund-limited, and the benefit to individual exporters has been capped at Rs 10 Crore per annum per IEC (Import Export Code).
• In addition, the banks that lend to exporters at an average rate of more than Repo + 4% would be debarred under the Scheme.

                                               Source: The Hindu

Ques :- Consider the following statements with reference to the Interest Equalisation Scheme:

Statement-I

It provides pre- and post-shipment export credit to exporters in rupees.

Statement-II

 It is jointly monitored by the Directorate General of Foreign Trade (DGFT) and the Reserve Bank of India.

Which one of the following is correct in respect of the above statements?

A.Both Statement-I and Statement-II are correct, and Statement-II is the correct explanation for Statement-I.

B.Both Statement-I and Statement-II are correct, and Statement-II is not the correct explanation for Statement-I.

C.Statement-I is correct, but Statement-II is incorrect.

D.Statement-I is incorrect, but Statement-II is correct.

Answer A