In the circular issued on 11th July 2013, RBI has made following two changes in relation to Trade Credit transactions:
- Period of Trade Credit (Buyers Credit / Suppliers Credit) should be linked to the operating cycle and trade transaction.
- All in cost ceiling of 6 Month L+ 350 bps will continue to be applicable till September 30, 2013 and is subject to review thereafter.
This circular has removed the ambiguity on tenure for which buyers credit (Trade Credit) can be availed. Earlier RBI circular was open ended stating tenure allowed for raw material import was upto 360 days and decision was left on the banks (AD) to decide on clientwise tenure based on their internal criteria.
Above changes in the circular will have impact on…
- Buyers Credit rollover transaction will not be possible for tenure more than mentioned in sanction limits.
- Those clients who were using buyers credit for arbitrage purpose earlier, this window has closed.
- RBI Circular Reviewing All in Cost ceiling and Tenure of Trade Credit: Dated: 11-07-2013
- Master Direction – External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers: Dated: 19-09-2016
- RBI Master Direction – Import of Goods and Services: Dated: 31-03-2016