State Bank of India (SBI), the country's largest lender, today announced a 0.5 percentage point reduction in interest rates payable on export credit, supplementing RBI's earlier steps increasing the export refinancing limits of banks.
The RBI had, on 18 June, announced an increase in the eligible limit of the export credit refinance facility of banks from 15 per cent to 50 per cent of the outstanding export credit, thereby providing additional liquidity of over Rs30,000 crore to the export sector. (See: RBI gives a Rs30,000-crore boost to export credit)
"SBI has cut interest rates for exporters by 50 basis points effective last Saturday (23 June 2012). The decision was taken at asset liability committee meeting last Saturday," SBI chairman Pratip Chaudhuri said.
Export credit is linked to the bank's base rate and with SBI's base rate at 10 per cent, its export credit would be 2.5 per cent to 6 per cent above that rate, depending on credit worthiness of the borrower and the usage factor.
The increase in the refinancing limits of the outstanding rupee export credit for banks - called export credit refinance (ECR) - to 50 per cent from 15 per cent is intended to improve the liquidity of the exporter
Early this week, RBI in consultation with the finance ministry allowed Indian companies in the manufacturing and infrastructure sectors to borrow up to $10 billion overseas, in a bid to increase foreign fund inflows and cool rising dollar value against the rupee.