RBI announces revised trade credit policy framework

The Reserve Bank of India on Wednesday announced the coming into force of an amended framework under which trade credits can be raised under the automatic route up to the specified amount and in compliance with the other applicable norms. 

The designated Category I authorised dealer bank, while considering the trade credit proposal, is expected to ensure compliance with applicable guidelines by their constituents, breach of which will invite penal action or adjudication under the Foreign Exchange Management Act, 1999.
The amended trade credit policy will come into force with immediate effect, RBI said.
Trade credits (TC) refer to the credits extended by the overseas supplier, bank, financial institution and other permitted recognised lenders for maturity, as prescribed in the framework, for imports of capital/non-capital goods permissible under the Foreign Trade Policy of the Government of India. Depending on the source of finance, such TCs include suppliers’ credit and buyers’ credit from recognised lenders.
It includes rate of interest, other fees, expenses, charges, guarantee fees whether paid in foreign currency or rupee. Withholding tax payable in rupee shall not be a part of all-in-cost.
TC can be raised either under the automatic route or the approval route. Under the approval route, the prospective importers are required to send their requests to the Foreign Exchange Department, Central Office, Reserve Bank of India through their Authorised Dealer (AD) Banks for examination.
For the automatic route, the cases are examined by the Authorised Dealer Category-I banks.
These shall have the same meaning as assigned to them in Special Economic Zones Act 2005 as amended from time to time.