The Chairmen/ Chief Executives of all commercial banks

As you are aware, the earthquake that struck the nation on January 26, 2001 has affected the export activity of many of the exporters. To provide relief to the affected exporters, it has been decided to extend the following concessions:

(i) Extension of pre-shipment credit:

In cases where shipment is likely to be delayed beyond the specified time due to the calamity banks may, after satisfying themselves of the genuineness of the case, extend upto 180 days, pre-shipment credit granted for periods less than 180 days (based on the production cycle), at the interest rate applicable for the period upto 180 days (10 percent per annum) and for the period beyond 180 days and upto 360 days, banks may change the concessional rate applicable for the period beyond 180 days and upto 270 days, (13 percent per annum). Extension of credit beyond 360 days may also be considered, where necessary, on the basis of bank�s commercial judgement and discretion at the rate applicable for  �ECNOS-Pre Shipment� and with the approval of the bank�s Board.

In cases where the pre-shipment credit has been granted in foreign currency, extension beyond 180 days may be allowed as per the actual cost of rollover instead of applying 2 percent over the rate charged for the period upto 180 days as per extant instructions.

(ii) Conversion of due into short-term loans:

Banks may convert the overdue pre-shipment credit, wherever considered necessary, into a short term loan repayable within a reasonable period of time after taking into account the settlement of ECGC claim, if any, in respect of guarantees taken by the bank. Penal interest which is now required to be decided by the banks should no be charged from the date of advance in case of non-shipment in such cases.

(iii) Application of asset classification norm:

Banks need not classify as Non-performing Asset (NPA) pre-shipment Credit granted to the exporters where the period of credit has been extended in terms of paragraph (i) above or where the pre-shipment credit has been converted into short-term loan in terms of paragraph (ii) above. The advances will be treated as NPA if the interest and /or instalment of principal remains unpaid for 180 days after it has become overdue taking into account the revised due dates fixed by the banks after extension of the period or conversion of the pre-shipment credit, as the case may be.