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TMI BlogTrade CreditsX X X X Extracts X X X X X X X X Extracts X X X X ..... ion: 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 this 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 Trade Credits include suppliers' credit and buyers' credit from recognised lenders. [ Para 13 of RBI FED Master Direction No. 5/2018-19 dated 26.03.2019 ] 2. Trade Credits Framework [ Para 14 of RBI FED Master Direction No. 5/2018-19 dated 26.03.2019 ] Trade Credit (TC) for imports into India can be raised in any freely convertible foreign currency (FCY denominated Trade Credits) or Indian Rupee (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort of non-capital goods can be up to three years. Vi All-in-cost ceiling per annum (i) Benchmark Rate plus 350 bps spread: For existing Trade Credits linked to LIBOR whose benchmarks are changed to ARR. (ii) Benchmark rate plus 300 bps spread: For new Trade Credits. Benchmark rate plus 250 bps spread. Vii Exchange rate Change of currency of FCY Trade Credits into INR Trade Credits can be at the exchange rate prevailing on the date of the agreement between the parties concerned for such change or at an exchange rate, which is less than the rate prevailing on the date of agreement, if consented to by the Trade Credit lender. For conversion to Rupee, exchange rate shall be the rate prevailing on the date of settlement. viii Hedging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of SEZs and DTAs as permitted above should also be in compliance with applicable provisions of SEZ Act, 2005 as amended from time to time. * For Trade Credit transactions related to SEZ, date of transfer of ownership of goods will be treated as Trade Credits date. * As there will be no bill of entry for sale transactions within SEZ, the inter unit receipt generated through NSDL can be treated as an import document. 4. Security for Trade Credit [ Para 16 of RBI FED Master Direction No. 5/2018-19 dated 26.03.2019 ] The provisions regarding security for raising Trade Credits are as under: 1. Bank guarantees may be given by the Authorised Dealers, on behalf of the importer, in favour of overseas lender of Trade Credits not exceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds trade credit; and v. Creation/ enforcement / invocation of charge shall be as per the provisions contained in Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018 and Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, as amended from time to time, or any other relative Regulations framed under the Foreign Exchange Management Act, 1999 and should also comply with applicable FDI/FII/SEZ policy/ rules/ guidelines.6 Note: The directions on issuance of corporate or personal guarantee mentioned under this provision shall come into force from the date of publication, in the Official Gazette, of the relative Regulations issued un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dealer banks as per the aforesaid procedure. 2. Quarterly reporting: Authorised Dealer Category I banks are also required to furnish data on issuance of bank guarantees for Trade Credits by all its branches, in a consolidated statement, at quarterly intervals on the XBRL platform. * For the above purpose Authorised Dealer banks may login to the site https://secweb.rbi.org.in/orfsxbrl/ using their User name, Password and Bank code. For downloading the relevant form, Authorised Dealer banks may follow the link 'Download Returns Package' and download the form. * After following the successive steps, Authorised Dealer banks may upload the file. For User name and Password, Authorised Dealer banks may write at [email protected] along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit, as applicable, is lower of operating cycle or one year (three years for shipyards / shipbuilders).
7. Period of Trade Credit
The period of trade credit reckoned from the date of shipment shall be as under:
* i. For import of non-capital goods - Maximum period of up to one year and linked with the operating cycle, or for a period as per the guidelines issued by the Reserve Bank from time to time for any import of any goods / for import by any specific sector.
* ii. For import of capital goods - Maximum period of three years or for a period as per the guidelines issued by the Reserve Bank from time to time. [ Schedule II para 4 of FEM (Borrowing and Lending) Regulation, 2018 ] X X X X Extracts X X X X X X X X Extracts X X X X
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