Reserve Bank of India (RBI) issued a fresh circular on September 11, 2012 in relation to Trade Credit for Import into India. Please find below summary of changes made into existing policy:
- Maximum tenure under Buyers Credit for import of capital goods has been extended from 3 years to 5 years for company classified as Infrastructure as defined in guidelines on External Commercial Borrowings (ECB). Infrastructure sectoris defined as under:
- Roads including Bridges
- Sea Port and Airport
- Industrial Parks
- Urban Infrastructure (water supply, sanitation and sewage projects)
- Exploration and Refining
- Cold storage or cold room facility, including for farm level pre-cooling, for preservation or storage of agricultural and allied produce, marine products and meat.
- Trade Credit must be availed for Minimum fifteen months at one go and should not be in the nature of short-term roll overs.
- For Existing Trade Credit transactions availed on or before 14th December 2012, abinitio (from beginning) buyers credit would be for min tenure of 6 months.
- Banks are not permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) in favour of overseas supplier, bank and financial institution for the extended period beyond three years.
- All-in-cost ceiling for upto 5 years is 6 Month Libor + 350 bps. The all-in-cost ceilings include arranger fee, upfront fee, management fee, handling/ processing charges, out of pocket and legal expenses, if any.
- All other policy of trade credit remains unchanged and needs to be complied with.
- Starts from : Immediately
- Ends on: Subject to review based on the experience gained in this regard by RBI
- RBI has allowed refinancing of such bridge finance (if in the nature of buyers’/suppliers’ credit) availed of, with an ECB under the automatic route subject to conditions.
- Revised Guidelines: Trade Credit for Import into India: Dated: 11-09-2012
- Master Direction – External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers: Dated: 19-09-2016
- Recent Circular: External Commercial Borrowing (ECB) Policy – Bridge Finance for Infrastructure Sector: Dated: 11-09-2012
- Earlier Circular: External Commercial Borrowing (ECB) – Bridge Finance for Infrastructure Sector: Dated: 23-09-2011