Interest Equalisation Scheme (IES)

If you are a new MSME owner looking to expand into exports, the Indian government offers support through the Interest Equalisation Scheme. This scheme lowers the interest rates on pre-shipment and post-shipment export credit, helping you reduce the cost of funds. It makes your products more competitive in global markets by easing financial burdens. The scheme targets exporters in certain sectors and MSMEs, encouraging you to increase exports and generate employment.

What is the Interest Equalisation Scheme?

The Interest Equalisation Scheme for Indian exporters was launched by the Government of India on April 1, 2015. It was initially set for five years and has been extended multiple times, most recently up to June 30, 2024. The scheme is implemented by RBI with the help of banks and Directorate General of Foreign Trade (DGFT)/ Dept of Commerce (DOC) approve the scheme and provide consolidated reimbursement of benefits to RBI. It offers interest rate equalisation on pre and post shipment rupee export credit making borrowing costs lower than usual.

Objectives of the Interest Equalisation Scheme

• To provide exporters a cheaper source of rupee credit for pre-shipment and post-shipment activities.
• To assess overall cost of finance of exporters and adequacy of the coverage, duration, credit etc.
• To understand utilisation pattern of credit by exporters - bank wise & sector wise
• To reduce the cost of credit for exporters like you, especially MSMEs.
• To make Indian exports more competitive in the global market.
• To increase foreign exchange earnings and support the country’s balance of payments.
• To promote exports from labour-intensive sectors and MSMEs, aiding employment generation.

Key Features of the Interest Equalisation Scheme

• MSME exporters get a 5% reduction in interest rate payments on both pre- and post-shipment export credit.
• Large manufacturers and Merchant exporters get a 3% reduction in interest rate  payments on both pre- and post-shipment export credit.
• Exporter can opt to avail benefit of interest subvention from the bank and RBI is reimbursed by Dept of Commerce to release funds to concerned Scheduled commercial banks and Urban cooperative banks
• The scheme covers various sectors, especially labour-intensive ones like processed agricultural products, handicrafts, garments, and leather goods
• The benefit is available only if your goods meet criteria under the Rules of Origin (Non-Preferential) in the Foreign Trade Policy 2015-20, meaning significant processing must happen in India.

Financial Assistance Offered Under the Scheme

Eligibility Criteria for You to Avail the Interest Equalisation Scheme

Eligibility

• You must be an MSME exporter or a large manufacturer/merchant exporter.
• You should supply goods that meet the “originating from India” requirement as laid down in the Foreign Trade Policy.
• You must avail of export credit (pre-shipment or post-shipment) in Indian Rupees from an authorised bank.
• Your bank will typically require you to submit an auditor’s certificate confirming your eligibility and export details.

Non-Eligibility

• Exporters who do not hold a valid IEC code.
• If your are not MSME covered under for 416 identified Harmonised System (HS) code
• If you avail of export credit in foreign currency (the scheme only covers rupee export credit).
• If you are unable to provide required documents, such as an auditor’s certificate, or if your claims do not match the scheme guidelines.

Documents Required for IES Scheme

• Valid Import Export Code (IEC).
• External auditor’s certificate confirming eligibility and details of export credit availed.
• A loan sanction letter from the bank for pre-shipment or post-shipment credit.
• Export documents and invoices as proof of export.
• Application form or declaration as per bank/DGFT requirements.

How to Apply for the Interest Equalisation Scheme

Step 1: Go to the DGFT website and click on Services. Under Services, click on "Interest" and then head to the Equalisation Scheme.

Step 2: Generate a UIN (Unique Identification Number) as an exporter.

Step 3: Note that the UIN is valid for one year from the date of registration. During this period, applications for the Interest Equalisation Scheme (IES) should be submitted to the bank.

Step 4: The bank will scrutinise the application. The RBI issues guidelines for scrutiny and validation from time to time.

Benefits of the Interest Equalisation Scheme

• Cost Reduction
  You pay lower interest on export credit, enhancing your profitability.
• Improved Competitiveness
  Cheaper financing helps you price your products better in global markets.
• Financial Support
  Ensures availability of pre- and post-shipment credit at competitive rates.
• Boosts MSME Exports
  Focus on MSMEs provides you with better access to export finance.
• Employment Generation
  Encourages export growth in labour-intensive sectors that employ many people.

Real-World Examples of Interest Equalisation Scheme for Indian Exporters

• Engineering goods manufacturer took a loan of Rs 50,00,000 @ 10% lending rate, so the firm has to pay Rs 5,00,000 as interest payment due to the scheme manufacturer now pays Rs 2.50,000 because Govt covers @ 5% interest subvention.
• Textile manufacturer took loan of Rs 10,00,00 @ 11% lending rate, so the firm has to pay Rs 1,10,000 as interest payment due to the scheme manufacturer now pay Rs 60,000 because Govt covers @ 5% interest subvention

Related Government Support Plans with Interest Equalisation Scheme

Final Words

The Interest Equalisation Scheme is a vital tool for you as a new MSME exporter to access affordable export credit and compete effectively in global markets. By lowering your interest costs, it reduces financial stress and supports your business growth and job creation.