The Interest Equalization Scheme (IES) on Pre and Post Shipment Rupee Export Credit is an initiative designed to provide exporters, especially small and medium enterprises (MSMEs), with financial support by reducing the cost of export credit. The scheme effectively lowers the interest rate on export credit, helping Indian exporters remain competitive in the global market.
On September 20, 2024, the Reserve Bank of India issued a circular (No. DOR.STR.REC.44/04.02.001/2024-25) that outlines updates and instructions regarding the IES. Shortly after, the Government of India, through Trade Notice No.18/2024-2025 dated September 30, 2024, announced a further extension of the IES. This extension will continue for an additional three months, ending on December 31, 2024. This decision was made to provide exporters more time to access interest-equalized credit, as global economic conditions remain challenging, and export growth is critical to the country’s economic recovery and sustainability.
However, the extension comes with important modifications, specifically regarding MSME manufacturer exporters. One significant change is that the fiscal benefits available under the scheme are now capped at ₹50 lakhs for the Financial Year 2024-25, which includes the extended period up to December 31, 2024. This means that an MSME exporter can only avail a maximum benefit of ₹50 lakhs during this fiscal year.
For MSME exporters who have already availed equalization benefits of ₹50 lakhs or more as of September 30, 2024, no additional benefits will be available during the extended period. This cap is intended to ensure a fair distribution of benefits among eligible MSME exporters, preventing those who have already accessed substantial benefits from claiming more, thus allowing other exporters to benefit from the scheme.
Apart from the modified fiscal cap, all other terms and conditions of the IES remain unchanged. The scheme continues to offer support for both pre-shipment and post-shipment export credit, but with a focus on ensuring that the limited fiscal benefits are spread more equitably across eligible MSMEs.
This extension underscores the government’s commitment to supporting Indian exporters in a volatile global market, while also addressing concerns about equitable access to financial support within the MSME sector. The IES remains a key tool in facilitating India’s export growth, particularly for smaller exporters who face more difficulties in securing affordable credit.
