What is Interest Equalisation Scheme (IES)?

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What is Interest Equalisation Scheme (IES)? Blog Image

Overview:

The Union Cabinet recently approved an additional allocation of Rs 2500 crore for the continuation of the Interest Equalisation Scheme until June 30, 2024.

About Interest Equalisation Scheme (IES)

  • It was first implemented on 1st April, 2015, to provide pre- and post-shipment export credit to exporters in rupees.
  • It was initially valid for 5 years, upto 31.3.2020. The scheme has been continued thereafter, including a one year extension during COVID and further extensions and fund allocations. 
  • The scheme shall be implemented by the RBI through various Public and non-Public Sector banks who provide pre- and post-shipment credit to the exporters. 
  • The Scheme is jointly monitored by the Directorate General of Foreign Trade (DGFT) and the RBI through a consultative mechanism.
  • The scheme helps the identified export sectors to be internationally competitive and to achieve a high level of export performance.
  • The scheme is primarily meant for the labour intensive sectors. 
  • Features:
    • An eligible exporter has to submit a certification from the external auditor to the concerned bank to claim this benefit.
    • Banks provide IES benefits to the eligible exporters and claim a reimbursement from the RBI based on the external auditor certification furnished by the exporter.
    • Currently, the Scheme provides an interest equalisation benefit at the rate of 2% on pre- and post-shipment rupee export credit to merchant and manufacturer exporters of 410 identified tariff lines at 4-digit level and 3% to all MSME manufacturer exporters. 
    • The Scheme has now been made fund-limited, and the benefit to individual exporters has been capped at Rs 10 Crore per annum per IEC (Import Export Code). 
    • In addition, the banks that lend to exporters at an average rate of more than Repo + 4% would be debarred under the Scheme.

Q1) What is the Directorate General of Foreign Trade (DGFT)?

The Directorate General of Foreign Trade (DGFT) Organization is an attached office of the Ministry of Commerce and Industry and is headed by the Director General of Foreign Trade. Right from its inception till 1991, when liberalization in the economic policies of the Government took place, this organization has been essentially involved in the regulation and promotion of foreign trade through regulation. 

Source: Cabinet approves Additional allocation of Rs 2500 crore for continuation of Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit till 30.06.2024