Follow Us:

The government may soon ask for an audit of banks to check if they are passing on to exporters the interest rate discounts on loans, given as a part of the stimulus packages, following complaints from exporters that some banks were not crediting to their accounts the rebate. Government is  planning to ask the comptroller and auditor general to carry out an audit of banks to find out on a test check basis whether the subvention amount is getting credited to the account of exporters.

An interest rate subvention of 2% was announced for exporters in seven identified sectors in the previous financial year as part of the government’s efforts to help exporters tide over the crisis triggered by the global slowdown.

The seven export sectors include textiles, handicrafts, leather, marine products, gems & jewellery, carpets and small & medium enterprises. India’s exports have declined for thirteen months to October 2009. In the period April-October 2009 exports were down by 26%.

Under the subvention scheme, banks were allowed to charge interest rates not exceeding BPLR minus 4.5 percentage points on pre-shipment credit up to 270 days and post-shipment credit up to 180 days. The interest charged could, however, not be below 7%, the rate applicable to the agriculture sector under priority sector lending.

The department will also examine if the RBI can be asked to issue some guidelines to banks in the regard. The apex bank had already issued a circular in August this year asking all banks to strictly adhere to the scheme which requires banks to pass on the subvention and later claim a reimbursement from the Central bank.

Despite the measures, export credit had declined in the initial months of the current year. Aggregate Export Credit as Percentage of Net Bank Credit was down to 4.3% at the end of June 2009 from 5.3% in at the end of September 2008 when crisis broke out. While it has already been made clear to banks that they are required to pass on the benefits of the subvention scheme to exporters upfront and later claim a refund, certain banks still insist that they would not extend the facility till they are paid by the RBI.

Fieo has already taken up a few such cases with the RBI, which in turn, dealt individually with the banks. If exporters do not get the benefits of the subvention scheme on time, then the entire purpose of increasing their competitiveness in the shrinking export market is lost, the official said.

The idea behind carrying out the CAG audit is to understand the extent of the problem and take further action, if required.


Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
July 2024