The government has reintroduced interest subvention on pre‑ and post‑shipment rupee export credit to help micro, small and medium enterprise exporters manage working capital pressures. Announced from Chennai, the revived programme reduces the base subvention rate to 2.75% from the 3% rate that applied before the scheme was discontinued in December 2024.
Under the reworked framework, interest subvention India will apply to eligible lending institutions that provide export credit in rupees. The scheme will operate on a notified positive list of Harmonised System six‑digit tariff lines that covers about 75% of India’s tariff lines and prioritises sectors with high MSME participation and value addition. Restricted, prohibited and overlapping incentive items are excluded; defence and SCOMET‑notified products have been included to support strategic exports.
Interest subvention India changes and impact
The government has trimmed the number of HS codes covered by the scheme, meaning around 25% of tariff lines that featured in the earlier, broader scheme will no longer be eligible. Exporters and trade bodies will need to review the notified list to identify excluded items. Pankaj Chadha, chairman of the EEPC, said the previous scheme covered all codes and that exporters will have to work through the new list to determine which lines are no longer eligible.
Financial parameters for the intervention were laid out for FY26 and beyond. There will be an annual cap of Rs 50 lakh per exporter for FY26. The government has announced a tentative allocation of Rs 5,181 crore for the six‑year period from FY26 to FY31, equating to about Rs 863 crore per year. By comparison, the government had provided roughly Rs 1,750 crore in 2024 and spent Rs 3,699 crore in 2023‑24 under the previous iteration of the scheme.
Officials said the applicable rates will be reviewed twice a year, in March and September, against domestic and global benchmarks. Detailed operational guidelines will be issued by the Reserve Bank of India to govern implementation and disbursement.
To further support exporters, the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) will provide additional collateral guarantee support for export credit. Micro and small exporters may receive guarantee coverage of up to 85%, while medium exporters may receive up to 65% coverage. The scheme sets a maximum outstanding guaranteed exposure of Rs 10 crore per exporter in a financial year.
The reintroduction of this targeted support aims to balance fiscal constraints with the need to sustain export competitiveness among MSMEs. By narrowing the list of eligible tariff lines and lowering the subvention rate, policymakers appear to be seeking a more focused intervention that channels resources to sectors with strong MSME participation and strategic importance.
Trade bodies and affected exporters now await the formal positive list and the RBI’s operational guidelines to understand the full implications for their sectors and to plan working capital requirements for the coming financial year.
Key Takeaways:
- Interest subvention India relaunched with a base rate of 2.75% for pre‑ and post‑shipment export credit to ease MSME working capital constraints.
- Scheme covers roughly 75% of tariff lines via a notified positive list and includes targeted incentives for under‑represented markets.
- Allocation reduced to a tentative annual Rs 863 crore for FY26–FY31, with a cap of Rs 50 lakh per exporter for FY26 and bi‑annual reviews.
- CGTMSE will offer enhanced guarantee cover up to 85% for micro and small exporters and up to 65% for medium exporters.
