At the current MLR of 14 per cent, Exim Bank finance for product development in software will be at 7 per cent, which is lower than the average cost of Exim Bank's funds at nearly 10 per cent. The loan will be product-specific, and the concessional part of the credit will have to be repaid to the bank should the product be successful.

Desai said that loans will be extended only to established companies that can convince the bank about the viability of the new product. This is the first time Exim Bank is offering software product development finance, which is considered highly risky because of the high rate of obsolence in product development. Tillnow, most of its exposure to software sector was for financing of exports and professional services.

The bank has targeted about Rs 25 crore to be disbursed under this head this fiscal, and has earmarked Rs 2 crore for meeting the interest differential between MLR and the concessional interest rate. The scheme will cover import of software tools, encryption technologies, hardware for product development, attributable manpower costs, specialised skills up-gradation, beta testing expenditure and other allied costs.

Exim Bank has also earmarked Rs 12 to be given as grant for promoting software exports. Under this scheme Exim Bank will grant up to 50 per cent of expenditure for developing or enhancing its entry in a new market. This could include participation in international IT fairs and other similar events, preparation of quality promotional material for overseas marketing etc. The maximum grant under this scheme will be Rs 15 lakh.

Exim Bank has also lined up new projects to increase participation oflocal companies in projects funded by multilateral agencies like World Bank, Asian Development Bank, African Development Bank and OECF-Japan.