Module: | MODULE A: INTERNATIONAL BANKING
Q118: Consider the following statements regarding the Trade Relief Measures for Exporters issued in November 2025:
1. Pre-shipment and post-shipment export credits sanctioned on or before March 31, 2026, may be extended up to a maximum duration of 450 days from the original date of disbursement.
2. Outstanding packing credit, where the actual physical dispatch of goods could not take place due to market disruptions, can be legally liquidated using funds from domestic sale proceeds.
3. During the financial moratorium period granted under these specific relief measures, interest accrues on a compound basis and is added to the principal outstanding every quarter.
Which of the above statements is or are correct?
2. Outstanding packing credit, where the actual physical dispatch of goods could not take place due to market disruptions, can be legally liquidated using funds from domestic sale proceeds.
3. During the financial moratorium period granted under these specific relief measures, interest accrues on a compound basis and is added to the principal outstanding every quarter.
Which of the above statements is or are correct?
✅ Correct Answer: A
🎯 Quick Answer:
Statements 1 and 2 are correct. Statement 3 is incorrect.They are designed to support and protect exporters who are facing severe global economic headwinds, massive supply chain disruptions, or sudden geopolitical crises.
Structural Breakdown: The November 2025 directive permits banks to extend the total credit repayment tenor to 450 days.
Crucially, it also allows the liquidation of unutilized packing credit through alternate sources, such as domestic sales or substitute export orders, without treating the action as a commercialization violation.
Historical Context: Under normal regulatory circumstances, if an export order is cancelled and the goods are sold domestically, the packing credit must be recovered at a significantly higher commercial interest rate rather than the concessional export rate, acting as a penalty.
The 2025 relief measure suspended this penalty to protect businesses.
Causal Reasoning: Statement 3 is strictly incorrect.
The central bank explicitly mandated that during the moratorium, interest shall accrue exclusively on a simple interest basis, without any compounding effect.
This means there is no interest charged on accumulated interest, a crucial provision intended to prevent an unmanageable debt burden from crushing stressed exporters.