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The Reserve Bank of India (RBI) has simplified rules for credit to exporters by permitting banks to allow exporters to receive long-term export credit subject to certain riders. According to RBI, exporters can now get long-term loans from banks for up to 10 years to service export contracts, easing the previous norms that only allowed loans of up to one year period.
Banks can make such payments to exporters who have a satisfactory track record of three years and adjust these payments against future exports.
Besides, banks cannot charge interest rates exceeding 200 basis points above London Interbank Offered Rate (LIBOR). According to RBI the documents in this regards should be routed through the banks and banks should ensure compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) guidelines.
RBI also said that such export advances shall not be permitted to be used to liquidate rupee loans. Besides that double financing for working capital for execution of export orders should be avoided.
Also exporters who receive loans of $100 million or above need to report the transaction immediately to RBI.
