RBI Trade Relief Measures

Context

1. India is facing global trade disruptions, and exporters are struggling with debt repayments and delays in shipments.
2. To support them, the Reserve Bank of India (RBI) has announced trade relief measures such as loan moratorium, extension of export credit period, and relaxations in asset classification.
3. These measures apply to banks, NBFCs, cooperative banks, and all-India financial institutions.

What are RBI’s Trade Relief Measures?

1. These are temporary support steps introduced by the RBI to help exporters manage cash flow problems, delayed shipments, and repayment difficulties.
2. The measures apply to sectors such as chemicals, plastics, rubber, leather, apparel, carpets, footwear, iron and steel articles, reactors, boilers, electrical machinery, and related equipment.
3. Key components include:
   1. Loan moratorium: A temporary pause in loan and interest payments to reduce exporters’ repayment burden.
   2. Extension of export credit period: More time (up to 450 days) for exporters to repay pre-shipment and post-shipment credit.
   3. Relaxation in loan classification norms: Moratorium months will not be counted as overdue, so accounts won’t turn into NPAs during this period.
   4. Working capital flexibility: Banks can adjust margins or reassess limits to ease exporters’ cash flow problems.
   5. FEMA-related time extensions: Exporters get extra time to receive export payments (15 months) and ship goods against advance payments (3 years).

Why do these measures matter?

These steps are important because:

1. Exporters are facing serious disruptions in global markets.
2. Many exporters are struggling to repay loans on time.
3. S. tariffs on India are very high (50%), adding extra pressure.
4. Delays in foreign payments reduce exporters’ cash flow.
5. Without support, defaults may rise, affecting both exporters and banks.
6. Export performance is crucial for jobs, foreign exchange earnings, and economic stability.

How the RBI Trade Relief Measures Work?

1. Loan Moratorium (Pause on Payments)
   2025. Exporters do not have to pay loan installments or working capital interest falling due between September 1, 2025 and December 31, 2025.
   2026. Simple interest will continue to accrue (no compounding).
   2027. The accumulated interest will be converted into a Funded Interest Term Loan (FITL).
   2028. FITL must be repaid between March 31 and September 30, 2026.
2. Working Capital Flexibility: Banks may reduce margins, or reassess working capital limits to ease exporters’ cash-flow problems.
3. Extension of Export Credit Period
   1. Export credit repayment period increased from 270 days to 450 days.
   2. Applies to pre-shipment and post-shipment credit given till March 31, 2026.
   3. For packing credit taken before August 31, 2025, exporters may repay using:
      1. Domestic sale proceeds,
      2. Proceeds of another export order,

• Or any legitimate alternate source.

4. Relaxation in Asset Classification (NPA Rules)
   1. The moratorium period will not be counted towards days-past-due (dpd) for NPA classification.
   2. These actions will not be treated as restructuring.
   3. Credit bureaus must ensure exporters’ credit scores are not harmed.
   4. For eligible standard accounts in default as of August 31, 2025, banks must make a 5% general provision by December 31, 2025.
5. Monitoring and Reporting
   1. Banks must maintain a Management Information System (MIS) with borrower-wise details of relief given.
   2. Fortnightly reports (15th and month-end) must be submitted to RBI.
6. FEMA Relaxations (Export Payments and Shipments)
   1. Time limit to receive export payments extended from 9 months to 15 months.
   2. Time allowed for shipment of goods against advance payments extended from 1 year to 3 years.

Challenges and Way Forward

Conclusion

The RBI’s relief package provides timely support to exporters dealing with global trade disruptions and repayment difficulties. By offering moratoriums, extending credit periods, easing classification norms, and relaxing FEMA rules, the RBI aims to stabilise exporter cash flows, prevent loan defaults, and maintain credit stability in a challenging global environment.