RBI cuts interest rate ceiling on export credit by 150 bps

MUMBAI: The Reserve Bank on Friday slashed the maximum interest rate banks can charge on foreign currency loans extended to exporters to 200 basis points above global benchmark benchmark Libor, a move to boost sagging exports.

"It has been decided ... to reduce the ceiling rate on export credit in foreign currency by banks to Libor plus 200 bps from the present ceiling rate of Libor plus 350 bps with immediate effect," RBI said in a statement.

London Interbank Offered Rate (Libor) is a widely used interest rate global benchmark.

However, the cut in the ceiling rate is subject to banks not levying any other charges such as service charge and management charge, except for recovery towards out of pocket expenses incurred, RBI said.

The revision in the rates of interest would be applicable only to fresh advances, the central bank said.

Similar changes may be effected in interest rates in cases where Euro Libor/Euribor has been used as the benchmark.

Federation of Indian Exports Organisations (FIEO) president A Sakthivel welcomed the decision to lower foreign currency export credit rate.