RBI announces trade relief measures for exporters amid global disruptions, Pg 25

Key Highlights:

• The RBI has introduced trade relief measures, effective immediately, to aid exporters facing debt servicing challenges due to global trade disruptions.
• Measures include a moratorium for eligible borrowers, extension of export credit tenor, and relaxation in asset classification norms.
• The moratorium applies to term loans and working capital interest payments falling due between September 1, 2025, and December 31, 2025.
• The maximum export credit period has been extended from 270 days to 450 days for pre- and post-shipment credit disbursed until March 31, 2026.

Detailed Insights:

• The RBI's measures are applicable to commercial banks, NBFCs, primary co-operative banks, and all-India Financial Institutions.
• Sectors eligible for relief include organic chemicals, plastics, rubber, leather, apparel, footwear, and articles of iron or steel.
• Interest will continue to accrue during the moratorium period but will be calculated on a simple interest basis, without compounding.
• Accumulated interest during the moratorium will be converted into a funded interest term loan, repayable after March 31, 2026, but no later than September 30, 2026.
• Regulated entities can recalculate ‘drawing power’ by reducing margins or reassessing working capital limits during the effective period.
• The moratorium period will be excluded when calculating the number of days past-due (dpd) for asset classification under IRACP norms.
• Granting a moratorium or deferment and recalculating ‘drawing power’ will not be treated as restructuring, and borrowers' credit history should not be adversely impacted.

Key Concepts Involved:

• Moratorium: A temporary suspension of payments, allowing borrowers to delay repayments without penalty.
• Export Credit: Loans provided to exporters to finance the production and sale of goods abroad.
• Asset Classification: Categorization of loans based on repayment performance, impacting provisioning requirements for banks.