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Wednesday, May 21, 2014

RBI extends advances tenor for exporters to 10 years

Rate of interest payable, if any, should not exceed LlBOR plus 200 basis points 

The Reserve Bank of India (RBI) allowed banks to provide loans with tenures of up to 10 years to exporters to help them ensure capital flows to fulfil long-term contracts. Existing norms allow banks to give loans for up to one year only. 

RBI said that in view of requests received from exporters, it has been decided to permit AD Category- I banks to allow exporters having a minimum of three years' satisfactory track record to receive long-term export advance up to a maximum tenor of 10 years to be utilized for execution of long-term supply contracts for export of goods. 

However, the RBI put conditions that the company should have capacity, systems and processes in place to ensure that the orders over the duration of the said tenure can actually be executed. 

The facility is to be provided only to those entities, which have not come under the adverse notice of Enforcement Directorate or any such regulatory agency or have not been caution listed. 

Such advances should be adjusted through future exports. The rate of interest payable, if any, should not exceed LlBOR plus 200 basis points. 

Such export advances shall not be permitted to be used to liquidate Rupee loans, which are classified as NPA as per the Reserve Bank of India asset classification norms. 

Double financing for working capital for execution of export orders should be avoided.
Receipt of such advance of US$ 100 million or more should be immediately reported the RBI.
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