Exporters have always complained that the loan facilities available to them in India come with much higher interest rates compared to other foreign countries where their competitors operate. Due to these higher interest rates, they were unable to avail of credit/loan facilities, which made it difficult for them to execute export orders.
To solve this problem, the Government introduced the Interest Equalisation Scheme (IES) in 2015. Under this scheme, exporters receive a concession of an additional 2-3% on the normal rate of interest, reducing their effective rate of interest and providing them with a level playing field compared to their foreign competitors.
For example, if an exporter approaches a bank to get a Pre or Post Shipment Credit facility in Rupees, the bank usually charges a normal ROI of 9% to 10%. However, if the exporter is eligible under the IES scheme, they receive a discount/subvention of 2% to 3%. Thus, the exporter’s effective Rate of Interest becomes 6% to 7%.
The IES scheme is mainly for labor-intensive sectors. It was launched on April 1, 2015, for five years, but it is still in existence, and the Government has recently extended it until June 30, 2024. The Government allocates an annual budget of approximately Rs.3500 Crores for this scheme. In the image, you can see the Government’s spending for the last three years.