RBI eases trade credit rules to raise funds from overseas
The Reserve Bank of India eased trade credit norms to raise funds from abroad. As per RBI’s notification, all types of firms can avail trade credit facility now from overseas for import of capital goods. The relaxations in norms allow companies in all sectors to avail trade credit not exceeding $ 20 million up to a maximum period of 5 years for import of capital goods as classified by the Director General of Foreign Trade (DGFT).
Previously, only companies in the infrastructure sector were permitted to raise such trade credits.
However, Banks are not permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) in favor of overseas supplier, bank and financial institution for the extended period beyond 3 years.