RBI/2004-05/263
A.P.(DIR Series) Circular No. 24
November 1, 2004
To
All Banks Authorised to Deal in Foreign Exchange
Madam/Sirs,
Trade Credits for Imports into
India –Issue of Guarantees Delegation of Powers
Attention of Authorised Dealer
(AD) banks is invited to A.
P. (DIR Series) Circular No. 87 dated April 17, 2004 wherein ADs have been
permitted to approve trade credits for imports into India up to USD 20 million
per import transaction for import of all items permissible under the EXIM Policy.
However, for such trade credits the issuance of Guarantee/Letter of Undertaking
(LoU) /Letter of Comfort (LoC) by ADs, in favour of overseas supplier, bank
or financial institution, on behalf of their
importer constituents, requires prior approval of the Reserve Bank.
2. In order to promote investment
activity and to further liberalise the procedures relating to trade credits
for imports, the policy regarding issuance of guarantees has been reviewed.
Accordingly, it has been decided to accord general permission to ADs to issue
guarantees/LoUs/LoCs in favour of overseas supplier, bank and financial institution,
up to USD 20 million per transaction for a period up to one year for import
of all non-capital goods permissible under Foreign Trade Policy (except gold)
and up to three years for import of capital goods, subject to prudential guidelines
issued by Reserve Bank from time to time. The period of such guarantees/LoUs/LoCs
has to be co-terminus with the period of credit, reckoned from the date of shipment.
3. As regards reporting arrangements,
AD banks are required to furnish data on issuance of guarantees/LoUs/LoCs by
all its branches, in a consolidated statement, at quarterly intervals (format
in Annex) to the Chief General Manager, Foreign Exchange Department,
ECB Division, Reserve Bank of India, Central Office Building, 10th
floor, Fort, Mumbai – 400 001 from December 2004 onwards so as to reach the department not later than 10th
of the following month.
4. These amendments to trade
credit policy will come into force with immediate effect and will be subject
to review from time to time.
5. Necessary amendments to
the Foreign Exchange Management (Guarantees) Regulations, 2000 dated May 3,
2000 are being issued separately.
6. Authorised Dealer banks
may bring the contents of this circular to the notice of their constituents
and customers.
7. The direction contained
in this circular has been issued under sections 10(4) and 11(1) of the Foreign
Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions
/ approvals, if any, required under any other law.
Yours
faithfully,
F. R. Joseph
Chief General Manager
Annex to A. P. DIR
Series Circular No. 24 dated November 1, 2004
Guarantees / Letter of Undertaking
/ Letter of Comfort issued by ADs
As on quarter ended ……………….
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Name of the AD :
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Contact Person:
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Address :
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Tel:
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e-mail:
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Fax:
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(USD million)
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On behalf of Residents
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Guarantees / Letter of Undertaking
/ Letter of Comfort
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Issued
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Buyer’s Credit
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Supplier’s Credit
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Trade Credits (less than 3 years)
- Up to one year
- Above one year and less than three years
**
** (Limited to Import of
Capital Goods)
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Place:-----------------------
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Signature of the Authorised
Signatory
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Date: -----------------------
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[ Stamp]
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