TRADE CREDITS FOR IMPORTS INTO INDIA - REVIEW AND SIMPLIFICATION
A.P. (DIR Series) (2003-04) Circular No. 87, dated 17-4-2004
Trade Credits for Imports into India -
Review and Simplification
As Authorised Dealers (ADs) are aware,
effective September 27, 2002, ADs have been permitted to approve Short-Term
Credit (STC) up to USD 20 million per import transaction for a period less than
three years (vide A.P. (DIR Series) Circular No. 25 dated September 27,
2002). STC exceeding USD 20 million per import transaction requires prior
approval of the Reserve Bank.
2. The
present instructions have been reviewed in the light of experience gained and
recent developments. Consequently, it is clarified that the extant guidelines
covering such credits for imports of all items up to USD 20 million per import
transaction with a maturity period up to one year remain unchanged. Credits up
to USD 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. The reporting arrangements for such credits have been further
simplified. The revised guidelines are set out below.
3. It is
clarified that credit extended for imports directly by the overseas supplier,
bank and financial institution for original maturity of less than three years
is hereinafter referred to as ‘trade credit’ for imports. Depending on the
source of finance, such trade credit will include suppliers’ credit or buyers’
credit. It may be noted that buyers’ credit and suppliers’ credit for three
years and above come under the category of External Commercial Borrowings
(ECBs) which are governed by ECB guidelines issued vide A.P. (DIR
Series) Circular No. 60 dated January 31, 2004 and modified from time to time.
4. It has
been decided that ADs may henceforth approve trade credits for imports into
India up to USD 20 million per import transaction for import of all items
(permissible under the EXIM Policy) with a maturity period (from the date of
shipment) up to one year. For import of capital goods, ADs may approve trade
credits up to USD 20 million per import transaction with a maturity period of
more than one year and less than three years. No roll-over/extension will be
permitted by the AD beyond the permissible period.
5. As hitherto, ADs shall not
approve trade credit exceeding USD 20 million per import transaction.
6. The all-in-cost ceilings
will continue as under:
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Maturity period |
All-in-cost
ceilings over 6 months LIBOR* |
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Up to one year |
50 basis points |
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More than one year but
less than three years |
125 basis points |
*For the
respective currency of credit or applicable benchmark.
The all-in-cost ceilings include arranger
fee, upfront fee, management fee, handling/processing charges, out of pocket
and legal expenses, if any. The all-in-cost ceilings will be reviewed from time
to time.
7. As
hitherto, ADs shall not issue guarantee, letter of undertaking or letter of
comfort in favour of overseas lender on behalf of their importer constituent
for trade credit without prior approval of the Reserve Bank.
8. As
regards reporting arrangements, ADs are required to furnish details of
approvals, drawal, utilisation, and repayment of trade credit granted by all
its branches, in a consolidated statement, during the month, in form TC (format
in Annex) from April 2004 onwards to the Director, Division of
International Finance, Department of Economic Analysis and Policy, Reserve Bank
of India, Central Office Building, 8th floor, Fort, Mumbai - 400 001 (and in
MS-Excel file through email to deapdif@rbi.org.in ) so as to reach not later
than 10th of the following month. Each trade credit may be given a unique
identification number by the AD.
9. Necessary
amendments to the Foreign Exchange Management (Borrowing or Lending in Foreign
Exchange) Regulations, 2000 dated May 3, 2000 are being issued separately.
10. These
amendments to trade credit policy will come into force immediately. These
instructions supersede earlier instructions on trade credit issued by the
Reserve Bank and will be subject to review from time to time.
11. Authorised
Dealers may bring the contents of this Circular to the notice of their
constituents concerned.
12. The
directions contained in this circular have been issued under section 10(4) and
section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).
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Part
I : Approvals of Trade Credit granted by all branches during the
(Month/Year)......... |
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Name
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Contact
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Tel
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Sr. |
Date
of |
Loan |
Category |
Name |
Country |
Currency |
Amount |
Equiv. |
Rate
of |
Other |
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No. |
Approval |
Identification |
of |
of |
of |
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Amt.in
USD |
Interest |
charges |
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No. |
Borrower |
Lender* |
Lender* |
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in USD |
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1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
11 |
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Total |
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Form
- TC
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Part
I : Approvals of Trade Credit granted by all branches during the
(Month/Year).... |
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e-mail:
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Period
of credit |
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Type of Credit** |
Item of Import/proposed Import |
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All-in |
No. of |
Unit of time |
SC/ |
STC/ |
Description |
Category*** |
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cost |
Days/Mon./Yr. |
period |
BC |
LTC |
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12 |
13 |
14 |
15 |
16 |
17 |
18 |
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I.
Supplier’s Credit (SC)
II. Buyer’s Credit (BC)
III. Short-term Trade Credit (STC) (maturity
period up to one year)
IV. Long-term Trade Credit (LTC) (maturity
period more than one year and less than three years)
V. Total Trade Credit (TC) (I+II)
* or Supplier
** Please type respective code such as SC or BC; STC or LTC.
*** Petroleum Oil Lubricants (POL), Capital Goods (CG), Others (OT)
Note 1 : The format of the loan
identification number is : TC/(Name of the Bank/branch)/(Identification No.)
Note 2 : Information in column Nos. 8
to 13 should be numeric only. No alphabets should be entered in those columns.
Note 3 : Date format in col. No 2 is
YYYY/MM/DD. For example, December 31, 2003 should be entered as 2003/12/31.
Note 4 : Data on rate of interest
(col. No 10) & all-in-cost (col No. 12) should be entered as follows: 3 per
cent per annum is to be typed as ‘3.00’ without any % sign.
Note 5 : In the Col. No 13, No. of
days/month/year under period of credit may be entered as follows: ‘90’ for 90
days.
Note 6 : In the case of unit of time
period (Col. No. 14), only unit of time period such as days(DD), months(MM),
year(YY) to be entered.
Note 7 : Codes for Category of
Borrower (in Col. 4) may be entered as follows: PUB: Public Sector, BKG:
Banking, PVT:Private