Indian exporters seek 450-day trade credit after RBI raises rates to 5.5%

Indian exporters have called for a substantial extension of pre-shipment and post-shipment credit periods after the Reserve Bank of India raised its benchmark interest rate, warning that longer trade cycles and rising borrowing costs are placing additional pressure on working capital.

The Federation of Indian Export Organisations (FIEO) has asked the central bank to increase the permitted export-credit period from 270 days to 450 days, giving businesses an additional 180 days to finance production, shipment and collection of overseas payments.

The request followed the RBI’s decision on 7 October to increase its policy repo rate by 25 basis points to 5.5 per cent. The bank’s Monetary Policy Committee voted unanimously for the increase and moved its policy stance to calibrated tightening.
FIEO president S C Ralhan said the rate rise was understandable in the context of inflationary pressures but cautioned that exporters, particularly micro, small and medium-sized enterprises, faced a combination of higher financing costs and longer periods between spending money and receiving payment.

The organisation cited geopolitical uncertainty, volatile energy prices, supply-chain disruption, longer shipping and transit times, and delays in receiving export proceeds.
These pressures can extend the working-capital cycle at several points. Exporters may need to pay suppliers and production costs before goods leave the country, fund inventory while shipments are in transit and then wait for overseas customers to settle invoices.

FIEO argues that longer credit tenors would allow businesses to accommodate these delays without placing additional strain on liquidity or their ability to meet international delivery commitments.
The federation has also called for targeted liquidity assistance and affordable export finance, particularly for smaller businesses operating on narrow margins.

The RBI’s decision reflects a different set of concerns. The central bank pointed to persistent global uncertainty and rising inflation risks, while projecting real GDP growth of 7.1 per cent and consumer price inflation of 5.2 per cent for the 2026–27 financial year.

The requested extension has not been approved. It remains a proposal from the exporters’ representative body rather than an announced regulatory change.

The debate nevertheless highlights a growing tension in export finance: monetary tightening is intended to contain inflation, but longer payment and logistics cycles can increase the amount of credit businesses require before a sale converts into cash.