India’s exports contracted by 1.8% in December 2019 for the fifth month in a row, due to which the exporters raised concerns over credit availability. Thus, the Finance Minister announced the NIRVIK scheme (Niryat Rin Vikas Yojana) scheme while presenting the Union Budget 2020-21 to boost the export segment of the Indian economy.
The NIRVIK scheme is implemented under the Export Credit Guarantee Corporation of India (ECGC) to enhance credit availability to small-scale exporters and ease loan lending. It aims to provide high insurance coverage for exporters, reduce insurance premiums for small-scale exporters and simplify procedures for claim settlement. It will lead to higher export credit disbursement.
Objectives of the NIRVIK scheme
- It facilitates high credit disbursement for small exporters and helps them export at a higher level.
- It offers an insurance cover to small exporters to expand their businesses.
- It gives a chance to small exporters to reduce their policy premium.
- It simplifies the claim settlement process making it easy for exporters to work.
- It facilitates a business-friendly environment leading to job creation.
- It helps small exporters to enhance export and grow their small scale export businesses to a large scale.
Features of the NIRVIK scheme
- Provides insurance cover up to 90% of the principal and interest amount.
- Insurance cover includes both pre and post-shipment credit.
- The extended coverage will ensure that Foreign export credit interest rates are below 4% and the Rupee export credit interest rates are below 8%.
- Jewellery, gems and diamond sector borrowers with a limit of above Rs.80 crore will have a higher premium rate than those from other sectors since the loss ratio is high.
- The premium rates will be 0.60 per annum for exporters having account limits below Rs.80 crore.
- The premium rates for exporters whose account limits are beyond Rs.80 crore will be 0.72 per annum.
- Where the losses exceed Rs.10 crore, the bank documents and ECGC officials will be subjected to inspection, and the banks should pay a monthly premium to the ECGC on the principal and interest.
Eligibility Criteria for the NIRVIK scheme
- Only small exporters are eligible to apply for the NIRVIK scheme.
- Small exporters must be Indian citizens having an export business.
- Small exporters should have a bank account.
Benefits of the NIRVIK scheme
- The NIRVIK scheme plays a crucial role in improving the affordability and accessibility of credit for exporters.
- It will dispense the procedural hurdles and become exporter friendly.
- The extended insurance cover will bring down the cost of credit due to factors such as better liquidity, capital relief and quick settlement of claims.
- It will benefit the MSMEs (Micro, Small and Medium Enterprises) due to simplified procedures and improvements in the ease of doing business.
- It offers more liquidity due to the continuous availability of working capital and instant claim settlements for export production.
- It facilitates the Indian exports to be competitive in international and national markets.
- It offers reduced tax reimbursements and insurance costs to enhance credit loans and productivity.
- It ensures that the foreign and domestic exchange rates remain less than 4% and 8%, respectively.
- It minimises the risk of non-payments.
However, the Ministry of Finance is yet to launch the scheme. After the cabinet approves the scheme, the scheme application process for obtaining its benefits will be announced by the government.
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