A.P.(DIR Series) Circular No. 25/2002-03-RB, Dt. 27/09/2002

Imports into India - Short term credit

Attention of authorised dealers is invited to the directions contained in paragraphs A.12 and A.13 of the AP(DIR Series) Circular No. 9 dated August 24, 2000, and the provisions contained in paragraph 4(i) of Schedule to the Reserve Bank Notification No. FEMA 3/2000-RB dated May 3, 2000. Accordingly, in terms of the existing instructions, Suppliers' Credit , viz. short term loans where the credit for imports into India is extended by the overseas supplier for a period of more than six months requires prior approval of the Reserve Bank. Similarly, Buyers' Credit, viz., where short term loans for payment of imports into India is arranged by the importer from a bank or financial institution outside India for maturity of less than three years also requires prior approval of the Reserve Bank.

2. With a view to simplifying the procedure for imports into India, it has now been decided that uniform Regulations and procedures be made applicable to both categories of the short term credit, that is Suppliers' Credit as well as Buyers' Credit, with immediate effect till further notice.

3. Accordingly, the Authorised Dealers may approve proposals received in Form ECB for short term credit for financing, by way of either Suppliers’ Credit or Buyers’ Credit, of import of goods into India, provided :

a. The credit is being extended for a period of less than three years,

b. The amount of credit does not exceed USD 20 million, per import transaction

c. The `all-in-cost' per annum, payable for the credit does not exceed LIBOR +50 basis points for credit upto one year and LIBOR + 125 basis points for credits for periods beyond one year but less than three years, for the currency of credit.

4. Authorised dealers may issue approval by way of a letter on the lines of Annexure I to this circular and ensure submission of ECB-5 statement as hitherto.

5. International Banking Division of the authorised dealer may furnish the details of approvals granted by all its branches, during the month, in the Form ECB-ST (format enclosed) to the Chief General Manager, Exchange Control Department, Reserve Bank of India, Central Office, External commercial Borrowing (ECB) Division, Mumbai - 400 001, so as to reach not later than 5th of the following month. Each credit may be given a unique Identification number by the authorised dealers. The loan Identification number allotted to the loan/credit should invariably be quoted in all the reference made to this office.

6. All applications, in form ECB, for availing of short term credit for amount exceeding USD 20 million for any import transaction may be forwarded to the Chief General Manager, Exchange Control Department, Reserve Bank of India, Central Office, External commercial Borrowing (ECB) Division, Mumbai-400 001.

7. Accordingly, the directions contained in the paragraph A.12 and A.13 of the AP(DIR Series) Circular No. 9 dated August 24, 2000, may be treated as amended. Notification for amending the provisions of paragraph 4(i) of Schedule to the Notification No. FEMA3/2000-RB dated May 3, 2000, is being issued separately.

8. Authorised Dealers may bring the contents of this circular to the notice of their constituents concerned.

9. The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).

Yours faithfully,

Grace Koshie
Chief General Manager

Annexure - I

ADDRESSEE

LOAN IDENTIFICATION NO. : STC/(Name of the Bank/branch)/(Identification No.)

Dear Sir,

Proposal for Short Term Foreign Currency Loan/Credit
for US$ (or any other currency) from M/s

Please refer to your application dated _____________ in form ECB for the captioned short term credit. We advise that you have our approval to raise the short term credit for the purpose of imports.

2.	Details of the loan:	i)	Name of Lender			:	ii)	Category of Borrower		:	iii)	Country of Lender			:	iv)	Commodity imported/		:		proposed to be imported	v)	Type of goods of import		:	vi)	Type of Credit			:	vii)	Currency & Amount of Loan		:	vii)	Period of Loan			:	viii)	Rate of Interest			:	ix)	Other Charges, if any		:	x)	Repayment Terms			:	xi)	Security for loan (if any)		:	xii)	Expected date of draw down		:

3. The Loan Identification number allotted to this loan/credit should invariably be quoted in all the reference to this office pertaining to this loan/credit.

4. The approval is subject to following conditions:

i) The approval is valid for a period of 3 months from the date of issue.

ii) The loan should be drawn and repaid in the currency approved. No multi currency option is available.

iii) The loan/credit should be utilised strictly for the purpose for which it is approved.

iv) The Short Term Credit to be availed of under this approval should be repaid on the due date. (The roll-over of the credit, if any, can however be permitted by authorised dealer up to less than 3 years and beyond 3 years by RBI).

v) The loan is subject to compliance of the Exim policy of Govt. of India in force.

vi) In case the import is made on "collection basis " the Authorised Dealer shall ensure strict compliance with the instructions contained in A.P. (Dir Series) Circular No.9 dated 24th August 2000.

vii) You shall ensure the import of goods, for which the loan is raised, and shall submit the documentary evidence to us in due course.

5. THE BORROWER SHOULD PREPARE IN DUPLICATE A STATEMENT OF OUTSTANDINGS IN RESPECT OF THE LOAN IN FORM ECB-5. A COPY OF THE STATEMENT, SHOULD BE SUBMITTED TO CGM, ECD, RBI, C.O., ON A MONTHLY BASIS BY THE 10TH OF THE FOLLOWING MONTH TO WHICH IT RELATES, TILL THE LOAN IS FULLY REPAID.

6. Please note that interest (and other fees etc,) payable under the above loan/credit are liable to income tax, and hence subject to withholding tax as per the Income Tax Act, 1961.

Yours faithfully,

NOTE : This communication is issued from the foreign exchange angle under the provisions of FEMA and should not be construed to convey the approval by any other statutory authority or Government under any other laws/regulations. If further approval or permission is required from any other regulatory authority or Government under the relevant laws/regulations, the applicant should take the approval of the concerned agency before effecting the transaction. Further, it should not be construed as regularising or validating any irregularities, contravention or other lapses, if any, under the provisions of any other laws/regulations.

Copy forwarded for information and necessary action to:

1. The General Manager/Dy. General Manager/Asst.General Manager, Reserve Bank of India, Exchange Control Department. [ Name of the office ].

ECB-ST

(paragraph 5)

Details of approvals granted for Short Term Credit by all branches, during the month of …………

---

Sr. No. & Date of app- roval	Loan Identi- fication No.	Name & Address of the		Amount with Curr- ency	Amount Equi- valent in USD	Rate of Interest	Period of credit	Type of credit (Suppliers' / Buyers' credit)	Nature of goods (Capital/ Non-capital)	Remarks
		Borrower	Supplier/ Lender
1	2	3	4	5	6	7	8	9	10	11

(Please refer CIR. NO. 87/2003-04-RB, DT. 17/04/2004 - Trade Credits for Imports into India-Review and Simplification)

(Please refer A.P.(DIR Series) Cir. No. 04/2003-04-RB, Dt. 19/07/2003)

(Please refer A.P.(DIR Series) Cir. No. 106/2003-RB, Dt. 19/06/2003)

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