Exporters have urged the government to extend the interest equalisation scheme (IES) that is set to expire on June 30.
- According to Federation of Indian Export Organisations (FIEO), the scheme provides competitiveness to Indian exports, particularly to MSMEs, as the interest costs in India are much higher than in other countries.
- The bank rate in India is 6.5 per cent, whereas the bank rate in many of Asian economies is around 3.5 per cent. With a higher spread, the credit cost in India is generally over 5 to 6 per cent as compared to such countries.
- They say that the scheme is more relevant now since exporters are looking for larger credit due to a huge increase in sea and air freight.
About Interest Equalisation Scheme (IES)
- The interest equalisation scheme was first implemented in April 2015 for five years. The scheme allows exporters of 410 identified products and all exporters from the MSME sector, to get bank credit at a subsidised interest rate determined by the government.
- The banks are later reimbursed by the government for their lower interest earnings.
- The scheme has since got a number of extensions and the last one is set to lapse on June 30 2024.
- Right now, the rate of interest equalisation is 2 per cent for some manufacturers and merchant exporters for 410 identified products and three per cent for MSME manufacturers.
