The Hindu Business Line : Trade credit limits for imports clarified

AFTER a review of present arrangements, and in a bid to clarify afresh for the benefit of Authorised (Forex) Dealers (ADs) the procedures pertaining to issue of trade credits for imports into India, the Reserve Bank of India has stated that the extant guidelines covering such credits for imports of all items up to $20 million per import transaction with a maturity period up to one year remain unchanged. Credits up to $20 million per import transaction with a maturity period exceeding one year but less than three years would now be permitted only for import of capital goods.

As per existing guidelines, short-term credit (STC) exceeding $20 million per import transaction requires prior RBI approval. It has also been clarified that credit extended for imports directly by the overseas supplier, bank and financial institution for original maturity of less than three years will now be referred to as `trade credit' for imports. And depending on the source of finance, such trade credit will include suppliers' or buyers' credit. According to the RBI, such credits for three years and above come under the category of ECBs (external commercial borrowings), which are governed by specific guidelines, and modified from time to time.

ADs can now approve trade credits for imports into India up to $20 million per import transaction for import of all items (allowed under the Exim Policy) with a maturity period (from date of shipment) up to one year. And for capital goods imports, they can now approve such credits up to $20 million per import transaction with a maturity period of more than one year, but less than three years. No extension is to be permitted beyond the permissible period, the apex bank has clarified.

Our Kolkata Bureau