RBI exemption to exporters from base rate system.

The Reserve Bank of India (RBI) on Tuesday exempted the rupee loans to exporters engaged in four labour-intensive sectors—handicrafts, carpets, handlooms and SMEs—from the base rate system, a new minimum lending rate that will be effective from next month, reports PTI.

The RBI, however, clarified that the lending rate to these sectors cannot fall below 7%.

"If the interest rate charged to exporters (of the above sectors) goes below the base rate, such lending will not be construed to be violative of the base rate guidelines," it said in a notification.

Currently, the government provides interest subsidy of 2 percentage points on these loans subject to the condition that banks will charge interest rate not exceeding the benchmark prime lending rate (BPLR) minus 4.5%. From 1st July, base rate will replace BPLR.

The country's largest lender State Bank of India (SBI) on Tuesday announced its base rate at 7.5%, the lowest amongst all banks. This means that SBI can provide loans to exporters in these sectors below 7.5% but cannot provide them below 7%.

As per industry sources, while exports in segments like gems and jewellery and engineering goods have started showing signs of recovery, these four sectors continue to reel under the global demand slowdown.


Source : Moneylife