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All you need to know about Interest Equalisation Scheme and its benefits

The Interest Equalisation Scheme was launched to support Indian exporters with shipment credit. In this blog, learn more about its coverage, process, and eligibility criteria.
interest equalization scheme
To further accelerate exports and assist businesses in global expansion, the Government of India launched many schemes and incentives. One such scheme is Interest Equalisation, which was designed to provide export credit to exporters.

What is the Interest Equalisation Scheme?

The Government of India introduced the Interest Equalisation Scheme (IES) in April, 2015 to support Indian exporters with shipment credit. Although the scheme was introduced for five years when launched, it was later extended to March, 2024, owing to the challenges due to the COVID-19 pandemic1.

Coverage under the Interest Equalisation Scheme

The scheme initially covered a 3% interest equalization rate, which was later revised to 5% in November, 2018. However, the rate was kept at 3% for large manufacturers and merchant exporters. The scheme covered labor-intensive sectors that accelerated the potential for employment generation in the country. The key sectors covered under the scheme include coir and coir products, toys and sports items, readymade garments and fabrics, glass and glassware, handicrafts and handloom products, ceramic products and cosmetics, processed agricultural and food items and toiletries, among others.

Unique identification number for Interest Equalisation Scheme

When applying for interest equalization in the pre or post-shipment phase, an exporter needs to furnish a unique IES number.

Steps to generate an identification number

Below are the steps to generate a unique identification number for IES:

Step 1

Register on the DGFT website and link IEC.

Step 2

Once registered, login and apply for IES. Fill in the required details.

Step 3

Save the acknowledgement carrying the UIN, which will be sent to the registered email address and mobile number.

Step 4

Pay a user charge fee through one of the available online modes of payment. No changes can be made after a UIN is generated.

Eligibility criteria for IES

Below are some of the eligibility points as per Foreign Trade Policy (FTP) 2015-20 Handbook of Procedures:
· The goods being exported must be made by the exporter. It should follow the definition of ‘manufacture’ as per the policy document.
· In case of imported inputs, goods will be considered as originating in India only if they have seen significant value-addition in the country.
· Telecom products manufactured in the country are eligible for this scheme when they are exported. However, it is subject to the condition of value addition level as specified by the Department of Telecommunications.

Procedure to apply for Interest Equalisation Scheme

Below are the steps for IES for export credit:

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

An exporter is expected to generate UIN.

Step 3

UIN is valid for one year from the date of registration. Applications for IES are expected to be submitted to the bank during this period.

Step 4

Bank will scrutinize the application. The RBI issues guidelines for scrutiny and validation from time to time.

Modified norms of the Interest Equalisation Scheme

As per the modified norms of IES, the scheme has been extended to March, 2024. Any exporter looking to seek benefits under IES needs to be registered with DGFT.

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Frequently Asked Questions

Is DGFT Registration required to claim Interest Equalisation Scheme?
Yes, DGFT registration is mandatory to claim benefits under IES.
What is the validity of the Unique Identification Number under IES?
UIN is valid for one year from the date of registration under IES.
How is IES provided to exporters?
IES is provided to the exporters by the banks. The banks charge a reduced rate of interest from eligible exporters.
Published on December 27, 2022.

Sources:
1. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12252&Mode=0
2. https://www.dripcapital.com/en-in/resources/blog/interest-equalization
3. https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10159

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