The Reserve Bank of India has today announced a one percentage point reduction in interest rates on post-shipment rupee export credit and freedom to banks to fix interest rates on non-resident (external) (NRE) rupee deposits. The Reserve Bank has also clarified that the proceeds of external commercial borrowings (ECBs) and global depository receipts (GDR), which are retained abroad or held in foreign currency account in India can be sold forward.

The details of the measures announced today are:

Interest rates on post-shipment rupee export credit

With a review to providing incentive for accelerated of export proceeds the interest rates on post-shipment rupee export credit have been reduced by one percentage point effective September 13, 1997. In respect of post-shipment credit up to 90 days, the rate of interest will, accordingly, be `not exceeding 11.0 per cent per annum' and for period beyond 90 days and up to six months from the date of shipment `13.0 per cent per annum'. Earlier, the rates of interest were `not exceeding 12 per cent per annum' and `14 per cent per annum', respectively.

The rate of interest of `13.0 per cent per annum' will apply from the date of advance and not only for the period beyond 90 days. This is a temporary measure which will be reviewed later.

Interest rate on NRE deposits

With a view to providing greater flexibility to the banks in mobilising non-resident deposits, banks have been advised that effective September 13, 1997, they are free to fix interest rates on deposits of all maturities under Non-Resident (External) Rupee (NRE) Accounts scheme. The minimum period of maturity of NRE deposits will, however, continue to remain at six months. Hitherto, interest rates on deposits under NRE accounts scheme with a maturity of 6 months and up to 1 year were prescribed at `not exceeding Bank Rate minus 2.0 percentage points' by the Reserve Bank.

Forward cover for GDRs/ECBs

The Reserve Bank has clarified that the proceeds of External Commercial Borrowing (ECB) and Global Depository Receipt (GDR), which are retained abroad, or held in foreign currency account in India can be sold forward.

Alpana Killawala
General Manager

Press Release : 1997-98/211