RBI allowed banks to provide loans with tenures of up to 10 years from existing one year period to exporters to help them ensure capital flows to fulfil long-term contracts
The Reserve Bank of India (RBI) on Wednesday 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.
“In view of requests received from exporters, it has been decided to permit 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 utilised for execution of long-term supply contracts for export of goods,” RBI said in a notification.
This facility is available with certain conditions, including an interest rate limit of 200 basis points above the London interbank offered rate (Libor), a global benchmark.
Besides, exporters receiving loans of $100 million or above need to report the transaction immediately to the RBI.
As per the conditions, there should be irrevocable supply orders in place.
The contract with the overseas party or buyer should be vetted and must clearly specify the nature, amount and delivery timelines of products over the years and the penalty in case of non-performance or contract cancellation, it said.
Such export advances can’t be used to liquidate rupee loans, which are classified as non-performing assets as per RBI norms, the central bank said.
These exporters should have the capacity, systems and processes in place to ensure that orders over the duration of the tenure can be executed, RBI added.
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
Fiercely independent and pro-consumer information on personal finance.
1-year online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
Complete access to Moneylife archives since inception ( till the date of your subscription )
