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

14 Mar 2019 Evaluate

The Reserve Bank of India (RBI) has relaxed norms for imports of capital and non-capital goods by raising the trade credit (TC) limit of up to $150 million or equivalent per import transaction 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 previous 350 bps.

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. As per 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 set at $50 million or equivalent per import transaction.

The RBI said that the revised framework comes into force with immediate effect. All-in costs refer to the sum of all fees, interest, and charges. Withholding tax payable in Indian currency is not part of all-in-cost. Earlier, under the automatic route, banks were permitted to approve trade credit up to $20 million. TCs exceeding $20 million per import transaction were required the prior approval of the RBI.

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