TRADE CREDITS FOR IMPORTS INTO INDIA

Trade Credits’ (TC) refer to credits extended for imports directly by the overseas supplier, bank and financial institution for maturity of less than three years.

Depending on the source of finance, such trade credits include suppliers’ credit or buyers’ credit. Suppliers’ credit relates to credit for imports into India extended by the overseas supplier, while buyers’ credit refers to loans for payment of imports into India arranged by the importer from a bank or financial institution outside
India for maturity of less than three years. It may be noted that buyers’ credit and suppliers’ credit for three years and above come under the category of External Commercial Borrowings (ECB) which are governed by ECB guidelines.

a) Amount and Maturity

AD banks are permitted to approve trade credits for imports into India up to USD 20 million per import transaction for imports permissible under the current Foreign Trade Policy of the DGFT with a maturity period up to one year (from the date ofshipment). 

For import of capital goods as classified by DGFT, AD banks may approve trade credits up to USD 20 million per import transaction with a maturity period of more than one year and less than three years (from the date ofshipment). 

No roll-over/extension will be permitted beyond the permissible period.

AD banks shall not approve trade credit exceeding USD 20 million per import
transaction.

b) All-in-cost Ceilings
The current all-in-cost ceilings are as under :
Maturity period                                     All-in-cost ceilings over 6 months LIBOR*

Up to one year
More than one year but less                               200 basis points
than three years

* for the respective currency of credit or applicable benchmark

The all-in-cost ceilings include arranger fee, upfront fee, management fee, handling/ processing charges, out of pocket and legal expenses, if any.

R.V.Seckar

rvsekar2007@gmail.com

919848915177