Interest Equalisation Scheme: How Indian Exporters Gain Competitive Advantage

Access to affordable credit remains a major hurdle for Indian exporters. Whether you run a SaaS startup, ship products overseas, or provide freelance services, high borrowing costs often reduce pricing flexibility and global competitiveness.

To address this, the government introduced the Interest Equalisation Scheme (IES): a subsidy on rupee export credit that lowers interest rates on pre-shipment and post-shipment loans.

Understanding IES isn’t optional anymore: it’s a financial tool you can use to strengthen cash flow, win more orders, and expand your export footprint. In this article, we’ll break down how the scheme works and how you can make the most of it.

Understanding the Interest Equalisation Scheme

IES was launched on 1 April 2015 by the Government of India to make export financing more affordable. Since interest rates in India are higher than in many other countries, exporters often struggle to match international pricing or sustain longer credit cycles. 

IES addresses this gap by reducing the interest payable on pre-shipment and post-shipment rupee export credit, easing cash-flow pressure during the export cycle.

The scheme provides a direct interest subsidy through banks, making export loans more affordable for eligible MSME manufacturers, service exporters, and certain tariff lines. It has been extended and refined multiple times to keep pace with market realities, proving its importance in strengthening India’s export capability and supporting long-term growth.

Eligibility Criteria for Interest Equalisation Scheme Benefits

To receive benefits under IES from 1 July 2024 onward, you must meet all of the following criteria:

• You must be an MSME manufacturer exporter. Other categories, such as merchant exporters or non-MSME units, are not eligible for fresh claims.
• Your MSME status must be registered on the Udyam portal, and the same details must match and appear correctly in the DGFT IEC database.
• Your exports must consist of physical goods manufactured in India, meeting the required value addition norms under the Foreign Trade Policy (FTP).
• Only pre-shipment and post-shipment rupee export credit linked to eligible export orders can be claimed under IES.

Eligibility Before and After 1 July 2024

Benefits of the Interest Equalisation Scheme for Exporters

The Interest Equalisation Scheme offers practical financial support that directly improves an exporter’s competitiveness. Here’s how it helps:

• Lower interest rates on export credit: Eligible MSME manufacturer exporters currently receive a 3% interest rate reduction on pre- and post-shipment rupee loans, easing the immediate cost of working capital.
• Improved profit margins: With lower borrowing costs, a larger portion of revenue stays with the business. This creates room for reinvestment, scaling, or better pricing strategies.
• Stronger global competitiveness: Reduced interest expenses allow exporters to quote sharper prices, which is often the deciding factor when bidding for international orders.
• Better cash flow management: In industries where buyers take months to pay, the scheme provides breathing space to handle long payment cycles and uncertain market conditions.
• Wider economic impact: As exports increase, businesses hire more workers, particularly in labour-intensive sectors like textiles, engineering goods, and manufacturing, supporting both employment and economic growth.

Explore Razorpay’s Global Payment Solutions

How to Apply for the Interest Equalisation Scheme: A Step-By-Step Guide

Applying for IES is a straightforward process, but every step must be completed correctly to receive the benefit. Here’s how you can do it:

1. Register on the DGFT Portal and Update Your IEC Profile: Go to the DGFT Portal and log in using your credentials. Make sure your IEC is active and properly linked. Then update your MSME status and business details. Banks check this information to confirm whether you qualify for the scheme.
2. Generate a Unique IES Identification Number (UIN): Go to ‘Services’ → ‘Interest Equalisation Scheme’ on the DGFT website and fill out the online application. Once submitted, you’ll receive a UIN, which is mandatory to claim the benefit.
3. Submit Your UIN to the Bank: Share the DGFT-generated UIN with your bank before availing pre-shipment or post-shipment export credit. The UIN:

• It is valid for one year
• Can be used with the concerned bank
• Must be generated again if you change your lending bank

4. Bank Processes the Interest Benefit: The bank verifies your eligibility and applies the reduced interest rate at the time of credit disbursal. Later, the bank claims reimbursement from the Reserve Bank of India.

Role of DGFT and RBI in Administering the IES

DGFT is responsible for setting policy and guidelines for the Scheme. It issues official notifications, outlines eligibility criteria, and operates the online portal where exporters generate their UIN. 

RBI acts as the implementing authority that issues instructions to scheduled commercial banks on how to apply the interest benefit and manages the reimbursement of the subsidy. Banks first reduce the interest rate for eligible exporters and then claim the refunded amount from the RBI.

Commercial banks act as the execution layer of the scheme. They verify exporter eligibility, apply the reduced interest rate at the time of loan disbursal, and maintain detailed records for reporting to the RBI.

Together, DGFT and RBI follow a consultative approach to track implementation and ensure that only eligible exporters receive the benefit efficiently.

Recent Updates and Future Outlook for the Interest Equalisation Scheme

The IES is no longer a static, long-term scheme. Over the last two years, it has been repeatedly extended, narrowed, and now positioned to be folded into a larger export support framework. As an exporter, you need to treat it as a moving target, not a one-time compliance exercise.

Here’s what has changed recently and what you should expect next:

Multiple Short Extensions, Now Up to 31 December 2024

The scheme was first extended to 30 June 2024 with revised rates – 3% for MSME manufacturer exporters (all HS lines) and 2% for manufacturer and merchant exporters in 410 HS lines.

Subsequent Trade Notices and RBI circulars pushed the end date first to 31 August 2024, and then to 31 December 2024, but only for MSME manufacturer exporters and with a cap on total benefit per MSME.

Non-MSME and Merchant Exporters Effectively Out After 30 June 2024

From 1 July 2024, fresh IES benefits are generally restricted to MSME manufacturer exporters. Claims from non-MSME and merchant exporters are not entertained for shipments or credit beyond 30 June 2024.

Tighter Caps for MSMEs in FY 2024–25

For the extended period (up to 31 December 2024), the government has capped the aggregate fiscal benefit at ₹50 lakh per MSME for FY 2024–25. Once you hit this ceiling, you cannot claim any further interest equalisation for that year. 

Consolidation Under the Export Promotion Mission (FY26–FY31)

In November 2025, the Union Cabinet approved a six-year Export Promotion Mission (EPM) with an outlay of ₹25,060 crore for FY26–FY31, aimed at consolidating fragmented export support schemes into one outcome-based framework. 

Policy notes indicate that financial support instruments like interest subvention, credit guarantees, and export-factoring will be regrouped under this mission, which strongly prioritises MSMEs and labour-intensive sectors.

Timeline: How the Scheme Has Evolved and Where It’s Headed

Maximising Benefits from the Interest Equalisation Scheme

To fully benefit from IES, it’s important to follow a few strategic steps. Here’s how exporters can make the scheme work more efficiently:

• Complete Your Udyam Registration and Update IEC Details: Your IEC and Udyam registration must be active and fully updated on the DGFT portal. Banks check these details before applying IES benefits, so any error or mismatch can delay approval. Keep business information consistent across all government portals. This ensures smooth eligibility verification and faster access to subsidised credit.
• Generate Your UIN Before Applying for Export Credit: The interest benefit applies only from the date your Unique IES Identification Number is issued. It cannot be claimed for credit taken earlier, which means timing is critical. Apply for the UIN well before you approach the bank for a loan. Treat it as a mandatory step in your export financing checklist.
• Work Closely with Your Bank: Each bank follows its own documentation and compliance steps for IES claims. Speaking directly to your bank’s export finance team helps you understand what they need from your side. This prevents delays during loan approval and ensures the interest benefit is applied correctly. Clear coordination saves time and avoids repeated follow-ups.
• Monitor DGFT and RBI Updates Regularly: DGFT and RBI frequently revise eligibility criteria, interest rates, and deadlines for the scheme. If these updates go unnoticed, you might miss out on benefits or submit outdated paperwork. Reviewing circulars regularly keeps you prepared for any change. It also helps you plan export finance more accurately and stay fully compliant.
• Combine IES with Efficient Payment Solutions: IES reduces your interest cost, but other expenses  like delays in receiving funds or currency conversion charges can still affect your profits. Using a reliable payment solution can speed up settlements and reduce manual work. Together, they improve cash flow and make your export operations more cost-efficient.
  

How Razorpay MoneySaver Export Account Simplifies Global Payments

The Interest Equalisation Scheme helps you lower your loan cost, but that’s just one part of the export journey. The real challenge comes later  bringing the money home quickly and safely when your foreign client finally pays you. This is where the Razorpay MoneySaver Export Account plays a practical role. With this you can:

• Open Local Bank Accounts Abroad Instantly: You can open local virtual bank accounts in countries like the US, UK and across Europe within  minutes. There is no heavy documentation, no setup fee and your buyer can pay using a simple local transfer.

• Save Up to 75% in Transfer Costs: Razorpay lets you receive global payments using the live Google exchange rate with complete fee transparency. Since there are no hidden charges or intermediary bank cuts, exporters can retain up to 75% more of their earnings compared to regular bank transfers. 

• Accept Payments from Multiple Payment Methods: Your international buyers can pay using bank transfers, cards, or wallets. The payment process is quick and easy, which helps reduce failed transactions and increases the chances of getting paid on the first attempt. You get success rates of over 90% for international payments, which is much higher than many traditional payment methods.
• Handle Compliance Easily: Exporters often struggle with paperwork after receiving payments. Razorpay solves this by providing digital FIRCs at a click of a button. The system also supports shipping bill regularisation and export documentation automatically, helping you stay compliant without follow-ups or manual submissions.

Conclusion

The Interest Equalisation Scheme continues to play a crucial role in supporting Indian exporters across sectors. By reducing the cost of export finance, it allows businesses to compete more confidently in global markets and maintain healthier profit margins. However, to benefit fully, exporters must stay updated on eligibility norms, application rules, and any changes announced by DGFT or RBI.

Leveraging such schemes is key for sustained export growth  not just as a cost-saving tool, but as a strategic advantage in global trade. Those who adapt quickly to policy updates and align their processes accordingly are better positioned to maximise financial gains and scale their international presence with stability.

FAQs

1. What is the primary objective of the Interest Equalisation Scheme?

The scheme aims to lower the cost of rupee export credit by offering an interest subsidy on pre- and post-shipment loans, helping Indian exporters stay price-competitive globally.

2. Who is eligible to avail benefits under the Interest Equalisation Scheme?

From 1 July 2024, only MSME manufacturer exporters are eligible for fresh benefits. Earlier, merchant exporters and exporters of select HS lines were also eligible. However, their eligibility has now been discontinued for fresh claims.

3. How can an exporter apply for the Interest Equalisation Scheme?

Exporters must generate a Unique IES Identification Number on the DGFT portal and submit it to their bank. The bank then applies the reduced interest rate and later claims reimbursement from the RBI.

4. What are the current interest equalisation rates offered?

Currently, eligible MSME manufacturer exporters receive a 3% interest rate reduction on their pre-shipment and post-shipment rupee export credit.

5. What role do DGFT and RBI play in the IES?

The DGFT sets the policy for the scheme and provides the portal where exporters generate their UIN. The RBI implements the scheme through banks; it issues operational guidelines and reimburses banks for the subsidy after they apply the reduced interest rate to exporters.

6. Are there any recent updates regarding the scheme’s extension? 

The scheme has been extended multiple times and is expected to be merged under a larger Export Promotion Mission. Exporters should closely monitor DGFT and RBI notifications for new guidelines and eligibility terms.

7. What are the maximum benefits an exporter can claim under the IES? 

As of today, the IES is not active in its old form, so there is no benefit limit for exporters right now. The last active limit was in FY 2024–25, when only MSME manufacturer exporters could claim benefits  up to ₹50 lakh.