Export credit in India has historically cost more than it does for competitors in China, Thailand, or Vietnam, where central bank rates and borrowing costs both sit lower. The Interest Equalisation Scheme (IES) was built to close some of that gap, effectively a government subsidy that brings down the interest rate an exporter pays on working capital. It's changed shape more than once in the last two years, so it's worth understanding where it stands now, not just what it originally was.
What the scheme actually does
At its core, IES works through the exporter's own bank. A lender extends pre-shipment or post-shipment rupee export credit at a reduced interest rate upfront, and the government reimburses the bank for the difference. The exporter never has to apply for a subsidy directly. They simply get charged a lower rate, and the bank recovers the gap separately.
A scheme that kept getting extended, then lapsed
The original IES ran for years on repeated short extensions rather than a fixed multi-year term. Through 2024, the scheme provided 3% interest relief for MSME manufacturer exporters across all tariff lines, and 2% for manufacturer and merchant exporters in 410 identified tariff lines. Over that year, eligibility narrowed further, restricting benefits mainly to MSME manufacturer exporters and capping the total benefit at ₹50 lakh per exporter for the fiscal year. The scheme was extended in short bursts, first to August 2024, then to December 2024, before finally lapsing on 31 December 2024 with no immediate replacement.
The new scheme: interest subvention under the Export Promotion Mission
In January 2026, the government launched a new interest subvention scheme under the six-year Export Promotion Mission, known as Niryat Protsahan, effectively replacing IES rather than reviving it under the old name. The current structure looks like this:
- Rate: A base interest subvention of 2.75% per annum on pre-shipment and post-shipment rupee export credit.
- Cap: Maximum benefit of ₹50 lakh per exporter per financial year.
- Eligibility: MSME exporters, whose products fall under a notified positive list of six-digit HSN tariff lines, covering roughly 75% of India's tariff lines.
- Exclusions: Restricted or prohibited items, waste and scrap, products already covered under PLI, and items already benefiting from schemes like RoDTEP or RoSCTL.
The exclusions matter in practice. Some engineering goods, certain steel products, and other categories already supported through other export incentive schemes don't stack an additional interest subvention on top, a design meant to avoid duplicating benefits rather than an oversight.
How to actually access the benefit
Unlike a scheme where a bank applies the discount automatically, this one requires exporters to register their intent first. The process runs through the DGFT portal:
- File an "Intent to Avail" application on the DGFT portal to obtain a Unique Identification Number (UIN).
- Submit the UIN to your bank before drawing pre-shipment or post-shipment export credit.
- The bank applies the reduced interest rate at disbursement and separately claims reimbursement from the government.
The benefit only applies from the date the UIN is issued, so applying after credit has already been drawn typically doesn't help retroactively. Keeping Udyam registration and IEC details consistent and up to date matters here too, since banks verify MSME status against the DGFT database before applying the discount.
Why exporters shouldn't treat this as a permanent entitlement
The scheme's history is a useful lesson: it has been extended, narrowed, allowed to lapse, and relaunched under a different structure within just two years. Exporters who build financial planning around IES as a fixed, guaranteed cost reduction have been caught out before when eligibility tightened or funding ran short mid-year. It's worth checking current DGFT notifications regularly rather than assuming last year's terms still apply.
Where private financing fits alongside government schemes
Interest subvention lowers the cost of credit, but it doesn't solve every financing gap. The ₹50 lakh annual cap, the sector exclusions, and the requirement to route funding through pre-shipment or post-shipment bank credit specifically mean many exporters, especially those scaling past the cap or working in excluded categories, still need financing structured around their transactions rather than a subsidised bank facility alone.
This is where a lender like CapitalXB, an RBI-licensed NBFC-Factor, complements rather than competes with government schemes. Our invoice discounting, factoring, and supply chain financing solutions evaluate the strength of an export order or invoice directly, filling working capital gaps that a capped, sector-limited subvention scheme isn't designed to cover on its own.
The bottom line
The Interest Equalisation Scheme, now reshaped into the 2026 interest subvention scheme under the Export Promotion Mission, remains one of the more direct ways for MSME exporters to lower borrowing costs. But it's a moving target, capped, sector-specific, and dependent on timely registration, not a substitute for financing built around the full scale of an exporter's working capital needs.