RBI extends trade credit up to $20 mn to firms in all sectors

Also relaxes ab-initio contract period of 15 months for all trade credits to 6 months

The Reserve Bank of India (RBI) on Tuesday allowed companies in all sectors to avail of trade credit not exceeding $20 million up to a maximum period of five years for import of capital goods as classified by director general of foreign trade, said a notification issued by the central bank.

Earlier this facility was allowed only for companies in the infrastructure sector.

The central bank also decided to relax the ab-initio contract period of 15 months for all trade credits to 6 months. However, RBI said that banks are not permitted to issue letters of credit/guarantees/letter of undertaking/letter of comfort in favour of overseas supplier, bank and financial institution for the extended period beyond three years.

RBI said that the amended trade credit policy will come into force with immediate effect and is subject to review based on the experience gained in this regard.