RBI Announces Trade Relief Measures for Exporters Amid Global Disruptions

Context:

• The Reserve Bank of India (RBI) has announced a trade relief package to support exporters facing debt-servicing stress due to global trade disruptions and weak external demand.

• The measures are aimed at preserving export competitiveness, preventing asset quality deterioration, and ensuring credit flow to stressed export sectors.

Key Highlights:

Regulatory Relief Measures

• Moratorium on eligible payments:

  • Applicable to term loan instalments and working capital interest

  • Covers dues falling between September 1, 2025 – December 31, 2025

• Extension of export credit tenor:

  • Pre-shipment and post-shipment credit period extended from 270 days to 450 days

  • Applicable for credit disbursed up to March 31, 2026

Asset Classification & Prudential Norms

• Moratorium period excluded from calculation of Days Past Due (DPD) under IRACP norms.

• Granting moratorium or recalculating limits will not be treated as loan restructuring.

• Borrowers’ credit history will not be adversely impacted due to these reliefs.

Interest Treatment

• Interest will continue to accrue during moratorium:

  • Calculated on simple interest basis

  • No compounding during the moratorium

• Accumulated interest to be converted into a Funded Interest Term Loan (FITL):

  • Repayable after March 31, 2026

  • Final repayment deadline: September 30, 2026

Operational Flexibility to Lenders

• Regulated entities may:

  • Recalculate drawing power

  • Reduce margins or reassess working capital limits during the relief period

Coverage & Eligible Sectors

• Applicable to:

  • Commercial banks

  • NBFCs

  • Primary co-operative banks

  • All-India Financial Institutions

• Eligible export sectors include:

  • Organic chemicals

  • Plastics and rubber

  • Leather, apparel, footwear

  • Articles of iron or steel

Relevant Prelims Points:

• Issue: Export sector stress due to global economic slowdown and supply-chain disruptions.

• Causes:

  • Weak global demand

  • Rising trade uncertainties

  • Payment delays in international markets

• Government / RBI Initiatives:

  • Export credit tenor extension

  • Moratorium on repayments

  • Relaxation in asset classification norms

• Benefits:

  • Liquidity relief for exporters

  • Prevention of NPAs

  • Continued credit availability

• Challenges:

  • Risk of deferred stress post-moratorium

  • Monitoring misuse of regulatory forbearance

• Impact:

  • Supports export growth

  • Stabilises banking sector balance sheets

Relevant Mains Points:

• Key Concepts & Definitions:

  • Moratorium: Temporary suspension of loan repayments without penal consequences

  • Export Credit: Financing for production and shipment of export goods

  • Asset Classification: Categorisation of loans based on repayment behaviour affecting provisioning

• Economic & Governance Dimensions:

  • Reflects counter-cyclical monetary regulation

  • Balances financial stability with real-sector support

• Banking & Financial Stability Aspect:

  • Avoids premature stress recognition under IRACP norms

  • Ensures continuity of viable export units

• Way Forward:

  • Complement RBI relief with targeted fiscal export incentives

  • Strengthen export insurance and trade finance mechanisms

  • Closely monitor post-relief asset quality trends

UPSC Relevance (GS-wise):

• GS 3: Economy, Banking, External Sector

• GS 2: Governance, Regulatory Institutions

• Prelims: Moratorium, Export Credit, IRACP Norms