Trade Credit Policy Framework

Two new parameters that are mentioned below:

1. Foreign Currency (FCY) denominated TC.
2. Indian Rupees (INR) denominated TC.

Automatic Route:

1. Up to USD 150 million or equivalent for every import transaction for gas/ oil refining and marketing, airline and shipping companies.
2. Up to USD 50 million or equivalent for every import transaction.

For Suppliers' Credit: 

Supplier of goods located outside India.

For Buyers' Credit:

Financial institutions, banks, foreign equity holder(s) that are situated outside India and financial institutions in International Financial Services situated in India.

For Capital Goods:

Maturity period is five years from the date of shipment

For non-capital Goods:

The maturity period is up to one year from the shipment date or the operating cycle, whichever is less.

For Capital Goods: Maturity shall be three years from the date of shipment.

For non-capital Goods:  The maturity period would be up to one year or the operating cycle, whichever is less.

For shipbuilders/ shipyards: The period of TC for import of non-capital goods can be up to three years.

Change of currency of FCY TC into INR TC: At the exchange rate that is existing on the date of the agreement between the parties concerned for such change or at an exchange rate, that is less than the rate prevailing on the date of the agreement, is considered to the TC lender.

FCY denominated TC:

1. The entities raising TC are required to abide by the guidelines that are issued by the concerned sectoral or prudential regulator for foreign currency that is needed for hedging.
2. Such entities comprise of a board-approved risk management policy.

INR Denominated TC: The overseas investors are eligible to hedge their exposure in Rupee through permitted derivative products with authorised dealers (AD) category/ banks in India.

Under FCY denominated TC: Change of currency of TC from one freely convertible foreign currency to any other freely convertible foreign currency or INR is freely permitted.

Under INR denominated TC: Change of currency from INR to any freely convertible foreign currency is not permitted.

The following would be kept as security to avail TC:

1. Bank guarantees would be given by the ADs, on behalf of the importer, in favour of overseas lender of TC not more than a maximum period of the amount of TC.
2. TC is secured by overseas guarantee that is issued by foreign banks and the overseas branches of Indian banks.
3. Movable assets (including financial assets).
4. Immovable assets (excluding land in SEZs).
5. Corporate or personal guarantee for raising TC.

Import of non-capital goods (except gold, palladium, platinum, rhodium, silver etc.):

Ad category I banks are allowed to issue bank guarantees in favour of overseas supplier, bank or financial institution up to USD 20 million for every import transaction of a maximum period up to one year.

Import of Capital Goods: Can be for a maximum period up to three years.

1. Bank guarantees would be given by the ADs, on behalf of the importer, in favour of overseas lender of TC not exceeding the amount of TC.

Period of such a guarantee should not be beyond the maximum permissible period for TC.