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FPME calls for action on IES of RBI and uniform bank charges for pharma exporters
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Shardul Nautiyal, Mumbai
July 18 , 2024
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The Federation of Pharmaceutical and Allied Products Merchant Exporters (FPME) has called for urgent action on the interest equalization scheme (IES) of the Reserve Bank of India (RBI) and uniform bank charges for pharma exporters.
The export community is facing significant challenges related to the IES of the RBI and the inconsistent bank charges levied on export transactions. Exporters have raised concerns that different banks impose varying fees for each transaction, leading to a call for a standardized fee structure.
FPME has identified these issues and is proposing a representation to the Indian Banks' Association (IBA) to advocate for uniform bank charges for exporters.
"We believe that a unified approach to bank charges will not only simplify transactions but also make the financial aspect of exporting more predictable and manageable. We seek guidance on how to proceed with this initiative effectively," said a spokesperson from FPME.
Additionally, there are pressing issues with the IES. Many banks are reportedly not crediting the interest equalization to exporters' accounts due to delays or non-receipt of grants from the RBI.
"This is a critical issue that impacts the competitiveness of our exporters. The timely crediting of interest equalization is essential for maintaining cash flow and ensuring the financial health of export businesses," said an FPME representative.
RBI in a notification on March 8, 2022 had stated that the government has approved the extension of Interest Equalization Scheme for Pre and Post Shipment Rupee Export Credit up to March 31, 2024 or till further review, whichever is earlier.
The apex bank also has interest equalisation rates under the scheme to 3 per cent for MSME exporters and 2 per cent for manufacturer exporters and merchant exporters.
Initially IES offered a 3 per cent rate of interest equalisation for manufacturer exporters. Subsequently, the interest equalisation rate was increased from 3 per cent to 5 per cent in respect of exports by manufacturers of the MSME sector with effect from November 2, 2018. The scheme was also extended to merchant exporters who could avail the benefit at the rate of 3 per cent for all exports under 416 tariff lines with effect from January 2, 2019.
The IES or interest subvention for the exports was implemented by the Directorate General of Foreign Trade (DGFT) from April 1, 2015 while operational guidelines to the banks were issued by the RBI. The scheme was valid for a period of five years i.e. till April 1, 2020.
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