RBI Revises Trade Credit Policy

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oi-Olga Robert


On Wednesday, the Reserve Bank of India (RBI) relaxed norms for the import of capital and non-capital goods by raising the limit of how much importers can borrow from overseas suppliers and financial institutions through the automatic route.

In a circular, the central bank released its modified revised framework for ‘Trade Credit Policy,’ which states that large companies like oil and gas refining, airline or shipping, can raise as much as $150 million through trade credit via the automatic route. Other companies can raise up to $50 million. This limit was earlier set at $20 million for all companies.

RBI Revises Trade Credit Policy

The all-inclusive-cost (all-in-cost) for overseas loans was reduced to the benchmark rate plus 250 basis points from the earlier 350 bps.

Trade credits (TCs) are credits extended by the overseas supplier, bank, financial institution and other permitted recognized lenders for maturity for imports of capital and non-capital goods permissible. These are raised in both foreign currencies as well as in Indian rupee.

All-in-cost includes the rate of interest, other fees, expenses, charges, and guarantee fees. Withholding tax payable in Indian currency is not part of all-in-cost.

The revised framework as specified by the RBI will come into force with immediate effect.

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This story has not been edited by Topic Hunt (with the possible exception of the headline) and has been generated from a syndicated feed. (GoodReturns)

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