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RBI increases ceiling rate on export credit in foreign currency

16 Nov 2011 Evaluate

In a move to give some relief to Euro-zone crisis hit local importers and exporters, the Reserve Bank of India (RBI) has increased the ceiling rate on export credit in foreign currency by 150 basis points to London Interbank Offered Rate (LIBOR) plus 350 basis points from the present ceiling rate of LIBOR plus 200 basis points, with immediate effect till March 31, 2012.

The RBI said, ‘keeping in view the tight liquidity conditions and widening of credit spreads due to recent developments in international financial markets, it has been decided to increase the ceiling rate on export credit in foreign currency.’

The apex bank has further asked the banks not to impose any additional charges like service charge, management charge, except for recovery towards out-of-pocket expenses incurred. Similar changes would be applicable in interest rates in cases where EURO LIBOR is used as the benchmark.

The alteration in the rates of interest would be valid only to fresh advances and are subject to review after March 31, 2012, the RBI said. Further it also increased the ceiling interest rate on the lines of credit with overseas banks from 6-months LIBOR plus 100 basis points to 6-months LIBOR plus 250 basis points.

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