RBI Permits Longterm Credit To Exporters

(Reserve Bank of India RBI) may ease norms for infrastructure funding www.ambitionias.com
  • The RBI will now permit the banks to offer long-term advances to exporters to facilitate long-term supply contact with exporters.
  • The exporters must have a minimum of 3yrs satisfactory record and must not have come under the adverse notice of Enforcement Directorate or any such regulatory agency.
  • They must have irrevocable orders in place with a clearly vetted contract that explicitly mentions the nature, amount and delivery timelines of products and penalty in case of non- performance or contract cancellation.
  • Product pricing should be comparable to prevailing international prices.
  • An advance up to a maximum tenor of 10yrs can be obtained for execution of long-term supply contracts for export of goods. These should be adjusted through future exports.
  • The rate of interest payable should not exceed LIBOR (London Inter-Bank Offered Rate) plus 200 basis points.
  • These advances are not allowed to liquidate new rupee loans, which are classified as NPA as per the Reserve Bank of India asset classification norms
  • Double financing for working capital for execution should be refrained. Any receipt of an advance of $100 million or more should be immediately reported to the Trade Division, Foreign Exchange Department, RBI, Central Office.
  • The bank must then duly evaluate and monitor the progress and effective utilisation of the advance and submit an Annual Progress Report to the Trade Division, Foreign Exchange Department and RBI.
  • Read at:http://www.thehindu.com/todays-paper/tp-business/reserve-bank-allows-banks-to-provide-longterm-credit-to-exporters/article6035134.ece

Exams Perspective:

  1. LIBOR (London Inter-Bank Offered Rate)
  2. Exports
  3. Imports
  4. Reserve Bank of India
  5. Foreign Exchange
  6. Long-term Supply Contracts for Export