RBI extends interest rate ceiling on export credit to six months
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The Reserve Bank today extended the interest rate ceiling on export credit with overseas banks to six months.
"It has been decided that the interest rate ceiling on lines of credit with overseas banks will continue to be six months Libor/Euro Libor/Euribor plus 250 basis points," RBI said in a notification.
Libor, or London Interbank Offered Rate, is the interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market.
RBI in November, 2011 had increased the ceiling on interest rate on the lines of credit with overseas banks to six months Libor/Euro Libor/Euribor plus 250 basis points from six months Libor/Euro Libor/Euribor plus 100 basis points.
The decision was being taken in view of the tight liquidity conditions and widening of credit spreads due to developments in international financial markets.
RBI said it was necessary and expedient in the public interest to do so and added the prescription regarding interest rate ceiling on overseas line of credit will continue till further orders.
The norms would continue subject to conditions banks will not levy any other charge such as service charge or management charge except for recovery towards out of pocket expenses incurred. (PTI)
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