Interest Subvention Re-launched with Lesser Rate, Allocation, Fewer HS Codes

Chennai: The government on Friday re-launched interest subvention for pre- and post-shipment export credit to ease the working capital constraints of MSME exporters. The government has brought down the interest subvention rate by 25 basis points, allocation and the number of HS codes that will be covered under the scheme.

Interest subvention will be provided on pre- and post-shipment rupee export credit extended by eligible lending institutions. A base interest subvention of 2.75 per cent has been provided. Earlier when the scheme was discontinued in December 2024, the subvention rate was 3 per cent. The government said that it also has a provision for additional incentives for exports to notified under-represented or emerging markets.

For FY26, there will be an annual cap of Rs 50 lakh per exporter. The applicable rates will be reviewed bi-annually in March and September, considering domestic and global benchmarks, the government said.

The interest subvention will be applicable only to exports covered under a notified positive list of tariff lines at the Harmonised System six-digit level, covering approximately 75 per cent of India’s tariff lines and reflecting high MSME participation.

“The previous scheme had covered all the HS Codes. We will have to go through the list to see which are the 25 per cent codes that are not eligible for the interest subvention,” said Pankaj Chadha, chairman, EEPC.

The tentative allocation for the scheme for six years from FY26 to FY31 will be Rs 5181 crore, which means Rs 863 crore will be the annual allocation. In 2024, the government had provided around Rs 1750 crore yearly for interest subvention scheme. In 2023-24, Rs 3,699 crore was spent on the scheme.

The interest subvention will be applicable only to exports covered under a notified positive list of tariff lines at the Harmonised System six-digit level, covering approximately 75 per cent of India’s tariff lines and reflecting high MSME participation.

According to the government, the positive list prioritises labour-intensive and capital-intensive sectors, MSME concentration and value addition, while excluding restricted and prohibited items, waste and scrap, and products covered under overlapping incentive schemes. Defence and SCOMET-notified products have been included to support strategic exports. Detailed operational guidelines for this intervention will be issued by the Reserve Bank of India.

Further, the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) will provide additional collateral guarantee support for export credit. Guarantee coverage of up to 85 per cent will be provided for Micro and Small exporters and up to 65 per cent for medium exporters, with a maximum outstanding guaranteed exposure of Rs10 crore per exporter in a financial year.