July 12, 2006
Aashadha 10, 1928(S)

Yours faithfully

(M.D. Patra)
Adviser-in-Charge

Master Circular on Export Credit Refinance (ECR) Facility

1.1 The Reserve Bank of India (RBI) provides export credit refinance facility to banks under Section 17(3A) of the Reserve Bank of India Act 1934, in order to encourage banks to extend more liberal export credit. This facility is given on the basis of banks' eligible outstanding rupee export credit both at the pre-shipment and post-shipment stages. The quantum of refinance is fixed from time to time based on the stance of monetary and credit policy of the RBI.

2.1 All scheduled banks (excluding RRBs), which are authorised dealers in foreign exchange and have extended export credit are eligible to avail of the export credit refinance facility.

3. Export Credit Refinance Facility

4.1 At present, the scheduled banks are provided export credit refinance to the extent of 15.0 per cent of the outstanding export credit eligible for refinance as at the end of the second preceding fortnight.

5.1 Export credit refinance facility is available at the Repo Rate (which is linked to Reverse Repo Rate under the Liquidity Adjustment Facility (LAF), as announced from time to time.

5.2 Interest shall be payable with monthly rests and the amounts of such interest calculated on daily balances would be debited to the account of such advances at the end of respective month or earlier when the balance outstanding is wiped out.

6.1 No margin is required to be maintained.

7.1 Repayable on demand or on the expiry of fixed periods not exceeding one hundred and eighty days.

8.1 RBI extends the export credit refinance against the Demand Promissory Note (DPN) of banks supported by a declaration that they have been extended export credit and the outstanding amount eligible for refinance is not less than the loan/advance from the RBI.

9.1 The minimum amount of availment under this facility is Rupees one lakh and multiples thereof.

10.1 This facility can be availed of at centres wherever the Reserve Bank has a Banking Department.

11.1 The refinance has to be repaid on demand or within 180 days.

12.1 In the event of a scheduled bank having irregular availment of export credit refinance, a penal rate of interest as decided by the Reserve Bank from time to time will be charged on the outstanding loan or loans.

12.2 The instances on which penal rate would be applicable for irregular availment of export credit refinance are set out in Table 1.

1. A stamped agreement in Form No. DAD 297.
2. A Demand Promissory Note (DPN) in Form No. DAD 295 A.
3. Board Resolution in Form No. DAD 298 authorising the borrowing under the scheme and also the officials who will execute loan documents on behalf of the bank.
4. For enhancement of limit, a letter in Form No. DAD 299 extending the agreement to enhance limit together with consolidated DPN for the fresh limit.
5. In terms of Para 7.30 of Banking Department Manual, Agreements and letters of extension need not be renewed so long as there is no change in the terms thereof. DPN should, however, be renewed every three years of their dates of execution not withstanding their validity for three years from the date of transaction.

13.2 The borrowing bank should submit to the Monetary Policy Department, Reserve Bank of India, a fortnightly declaration in form No. DAD.389 together with a statement of Export Refinance Entitlement in form No.DAD.390 to enable Reserve Bank of India to monitor the position of the outstanding borrowings under the scheme in relation to its outstanding export credit advances.

15.1 It is essential that the outstanding borrowings at all times are fully covered by the borrowing bank’s holding of export bills/amount of eligible pre-shipment advances as reported in their latest declaration. If at any time it is found that the total amount of bills held by banks/amount of eligible pre-shipment advances covered by the declaration falls below the amount borrowed, the bank should forthwith adjust or repay excess refinance from the RBI.