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.