Trade Credits for Import into India

As per extant guidelines on Trade Credit the companies in the infrastructure sector , where “infrastructure” is as defined under the extant guidelines on External Commercial Borrowings (ECB) are allowed to avail of trade credit up to a maximum period of five years for import of capital goods as classified by DGFT subject to the that (i) the trade credit must be abinitio contracted for a period not less than fifteen months and should not be in the nature of short-term roll overs; and (ii) AD banks are not permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) in favour of overseas supplier, bank and financial institution for the extended period beyond three years.
On review, it has been decided to further relax the condition of ‘abinitio’ buyers’ credit for 15 (fifteen) months to 6 (six) months for existing trade credits. However, the condition regarding ‘abinitio’ buyers’ credit for 15 months shall continue for future trade credit.

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