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RBI relaxes norms for imported goods by raising trade credit to $150 mn

Press Trust of India/Mumbai 13 Mar 19 | 10:34 PM

The Reserve Bank of India (RBI) on Wednesday relaxed norms for imports of capital and non-capital goods by raising the trade credit limit to $150 million under the automatic route.

Announcing the modified revised framework for 'Trade Credit Policy', the RBI, however, reduced the all-inclusive cost (all-in-cost) for overseas loans to benchmark rate plus 250 basis points from the earlier 350 bps.

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Trade credits (TCs) refer to the credits extended by the overseas supplier, bank, financial institution and other permitted recognised lenders for maturity for imports of capital and non-capital goods permissible.

According to the revised framework, TCs up to $150 million or equivalent per import transaction for oil and gas refining & marketing, airline and shipping companies can be availed under the automatic route.

For others, the limit is up to $50 million or equivalent per import transaction.

Earlier, under the automatic route, banks were permitted to approve trade credit up to $20 million. TCs beyond $20 million were required approval from the RBI.

The RBI said the revised framework comes into force with immediate effect.

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

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