Exporters to Receive Collateral-Free Loans
The Indian commerce department has launched an ambitious Export Promotion Mission aimed at enhancing the country’s export capabilities. This initiative, which includes a budget of Rs 2,250 crore, focuses on providing low-cost, collateral-free loans, supporting new market opportunities, and boosting export credit for e-commerce. A key component of this mission is the Niryat Rin Vikas (NIRVIK) scheme, designed to assist micro, small, and medium enterprises (MSMEs) and new exporters by addressing the high interest rates that have hindered their growth.
Niryat Rin Vikas Scheme
At the forefront of the Export Promotion Mission is the Niryat Rin Vikas (NIRVIK) scheme, which aims to equalize interest rates for exporters. This initiative specifically targets MSMEs and new exporters, allowing them to reset their interest rates annually based on competitive benchmarks from countries like China, South Korea, and Thailand. The government recognizes that Indian interest rates are significantly higher than those in these nations, often being two to three times greater.
Under this scheme, exporters will benefit from upfront financial support, with banks receiving reimbursements for the loans provided. The government plans to implement a negative list of sectors that will not qualify for this scheme, focusing on areas with low value addition or high misuse potential. This strategic approach aims to ensure that the support reaches those who need it most while minimizing risks associated with the funding.
Collateral-Free Loans and Risk Mitigation
To alleviate the financial burdens faced by exporters, particularly MSMEs and e-commerce businesses, the government is introducing measures to reduce collateral requirements. The plan includes providing over 80% of the collateral based on an online evaluation of the exporter’s track record. Each exporter will receive a unique identification number, facilitating monthly or quarterly fund disbursements under the scheme. Additionally, a credit guarantee fund will be established to further support these initiatives.
The government also aims to share up to 90% of the risk for MSMEs venturing into new and high-risk markets. This support will initially target at least 1,000 exporters in the first year, encouraging them to explore opportunities that may have previously seemed too risky. The Trade Assistance Fund will play a crucial role in this effort, allowing investments in liquid assets as per the EXIM Bank’s investment policy.
Access to Working Capital and Market Opportunities
The Export Promotion Mission also emphasizes improving access to working capital through various trade finance instruments. This includes post-shipment tools such as factoring, reverse factoring, and vendor financing, specifically designed for small exporters. While these benefits will come with certain ceilings, they represent a significant step toward easing financial constraints for businesses engaged in international trade.
Moreover, the government is launching a Focused Market Access Initiative to help exporters tap into new opportunities. This initiative will support exporters’ participation in trade fairs, covering up to 90% of the associated costs. In addition to financial backing, the initiative will also focus on enhancing branding efforts, ensuring that Indian products gain visibility in competitive global markets.
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