Trade Credits for Imports into India – Review of all-in-cost ceiling. - FEMA - 100

RBI/2011-12/479 A. P. (DIR Series) Circular No. 100 March 30, 2012 To All Category-I Authorised Dealer Banks Madam / Sir, Trade Credits for Imports into India Review of all-in-cost ceiling Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No. 44 dated November 15, 2011 relating to the all-in-cost ceiling of Trade Credits for imports into India. 2.Considering the developments in the global financial markets and the fact that domestic importers were experiencing difficulties in raising trade credit within the existing all-in-cost ceiling, the all-in-cost ceiling for trade credit was enhanced to 6 months Libor + 350 bps with effect from November 15, 2011 and was subject to review on March 31, 2012. On a review, it has been decided to continue with the enhanced all-in-cost ceiling for Trade Credits for a further period of six months as under: Maturity Period All-in-cost over 6 month LIBOR* Upto one year 350 bps More than one year and upto three years * for the respective currency of credit or applicable benchmark The all-in-cost ceiling will include arranger fee, upfront fee, management fee, handling/ processing charges, out of pocket and legal expenses, if any. 3. The all-in-cost ceiling is applicable up to September 30, 2012 and subject to review thereafter. All other aspects of Trade Credit policy remain unchanged. 4. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers. 5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (Dr. Sujatha Elizabeth Prasad) Chief General Manager Related Press Release 30 Mar 2012 Review of all-in-cost (AIC) on External Commercial Borrowings (ECB) and Trade Credit Review of all-in-cost (AIC) on External Commercial Borrowings (ECB) and Trade Credit On a review of the conditions in the global financial markets, it has been decided to continue with the enhanced all-in-cost ceiling for ECB and trade credit for a further period of six months as under: (i) All-in-cost for ECB Average Maturity Period All-in-cost over 6 month LIBOR* Three years and up to five years 350 bps More than five years 500 bps * for the respective currency of borrowing or applicable benchmark (ii) All-in-cost for Trade Credit Maturity Period All-in-cost over 6 month LIBOR* Up to one year 350 bps More than one year and up to three years The all-in-cost ceiling is applicable up to September 30, 2012, subject to review thereafter. Instructions have been issued vide A.P. (DIR Series) Circular Nos. 99 and 100 dated March 30, 2012 . Ajit Prasad Assistant General Manager Press Release : 2011-2012/1571 Related Notifications Mar 30, 2012 External Commercial Borrowings (ECB) Policy Review of all-in-cost ceiling Mar 30, 2012 Trade Credits for Imports into India Review of all-in-cost ceiling