RBI permits banks to provide loans to exporters for up to 10 years
Banks have been allowed by the RBI to give loans with tenures of up to 10 years to exporters to help them ensure capital flows to fulfil long-term contracts. As per current rules, banks are allowed to provide loans for up to 1 year only.
RBI has permitted banks to allow exporters having a minimum of 3 years’ satisfactory track record to get long-term export advance up to a maximum tenor of 10 years to be utilized for execution of long-term supply contracts for export of goods.
This facility is available with certain caveats, including:-
- An interest rate limit of 200 basis points above the London interbank offered rate (Libor), a global benchmark.
- Exporters getting loans of $ 100 million or above are required to report the transaction immediately to the RBI.
- There should be irrevocable supply orders in place.
- The contract with the overseas party or buyer should be examined and must clearly specify the nature, amount and delivery timelines of products over the years and the penalty in case of non-performance or contract cancellation.
- Export advances which are classified as non-performing assets as per RBI norms can’t be used to liquidate rupee loans.
- Exporters should have the capacity, systems and processes in place to ensure that orders over the duration of the tenure can be executed.