RBI relaxed Trade Credit Norms to raise Funds from Abroad

The Reserve Bank of India on 24 September 2013 relaxed trade credit norms to raise funds from abroad. In a notification, the RBI stated that all types of companies can avail trade credit facility now from overseas for import of capital goods.

The RBI further added that on a review, it has been decided to allow companies in all sectors to avail trade credit not exceeding 20 million US Dollars up to a maximum period of five years for import of capital goods as classified by the Director General of Foreign Trade.

Earlier, only companies in the infrastructure sector were allowed to raise such trade credits.

Banks are, however, not permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) in favour of overseas supplier, bank and financial institution for the extended period beyond three years.