Trade Credits for Imports into India - Review of all-in-cost ceiling - FEMA - 27/2008

Trade Credits for Imports into India - Review of all-in-cost ceiling RBI/2008-09/ 251 A. P. (DIR Series) Circular No. 27 October 27 , 2008 To, All Authorised Dealer Category - I Banks Madam / Sir, Trade Credits for Imports into India - Review of all-in-cost ceiling Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to the A. P. (DIR Series) Circular No. 42 dated May 28, 2008 relating to the all-in-cost ceiling of Trade Credits for imports into India. 2. As the domestic importers are experiencing difficulties in raising trade credits within the existing all-in-cost ceiling in view of the tight liquidity conditions in the international credit markets, an enhancement of the all-in-cost ceiling for trade credits was announced in the Mid-term Review of Annual Policy Statement for the Year 2008-09 (para-147). Accordingly, the revised all-in-cost ceiling for Trade Credits will be as under: Maturity Period All-in cost ceiling over 6-month LIBOR* Existing Revised Up to one year 75 basis points 200 basis points More than one year up to three years 125 basis points * for the respective currency of credit or applicable benchmark The all-in-cost ceiling will be reviewed from time to time depending on the conditions in the international financial markets. 3. The change in the all-in-cost ceiling will come into force immediately. All other aspects of Trade Credit policy remain unchanged. 4. Necessary amendments to the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 dated May 3, 2000 are being issued separately. 5. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers concerned. 6. 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 is without prejudice to permissions/approvals, if any, required under any other law. Yours faithfully, (Salim Gangadharan) Chief General Manager