Reserve Bank of India's Measures for Exporters

The Reserve Bank of India (RBI) has introduced extraordinary measures to support exporters amidst global trade disruptions. These measures include a moratorium on loan repayments aimed at providing exporters with breathing space to explore new markets and adapt to evolving trade scenarios.

Pre-emptive Measures

• The RBI's actions are a pre-emptive move despite no visible stress in the export sector at present.
• These measures offer a cushion to both banks and customers in response to global trade disruptions, especially those resulting from US tariffs.

Current Trade Scenario

• Uncertainty surrounds trade talks between India and the US, with no clear timeline for reaching an agreement.
• Exporters are encouraged to diversify markets, reset trade relationships, and adjust their operations without the immediate pressure of repayments.

Details of RBI's Moratorium

• A moratorium on all term loans for exporters due between September 1 and December 31, 2025, has been announced.
• This applies to exporters with an outstanding export credit facility as of August 31 and accounts must be "standard" or not in default.
• Interest will be charged during the moratorium period on a simple interest basis, avoiding compounding.

Sectors Benefiting from the Measures

• 20 sectors, including fisheries, footwear, textiles, and nuclear reactors, will receive regulatory benefits.
• The measures aim to mitigate debt servicing burdens due to trade disruptions and ensure the continuity of viable businesses.

Impact on the Export Ecosystem

• Though banks may not immediately feel stress from US tariffs, intermediaries in the export ecosystem are beginning to experience pressure.
• Exporters will have to bear costs, with sectors like shrimp showing stronger bargaining power compared to more competitive sectors like textiles and apparel.

Overall, these measures by the RBI are set to provide necessary relief and support to the export sector amidst ongoing global trade challenges.