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RBI permitted Export Advances up to 10 years
The Reserve Bank of India, in A.P. (DIR Series) Circular No.132, dated 21st May, 2014 permitted Authorised Dealer Category - I (AD Category - I) 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 utilized for execution of long term supply contracts for export of goods subject to the conditions as under:
a) Firm irrevocable supply orders should be in place. The contract with the overseas party /buyer should be vetted and clearly specify the nature, amount and delivery timelines of products over the years and penalty in case of non- performance or contract cancellation. Product pricing should be in consonance with prevailing international prices.
b) Company should have capacity, systems and processes in place to ensure that the orders over the duration of the said tenure can actually be executed.
c) The facility is to be provided only to those entities, who have not come under the adverse notice of Enforcement Directorate or any such regulatory agency or have not been caution listed.
d) Such advances should be adjusted through future exports.
e) The rate of interest payable, if any, should not exceed LlBOR plus 200 basis points.
f) The documents should be routed through one Authorized Dealer bank only.
g) Authorised Dealer bank should ensure compliance with AML / KYC guidelines and also undertake due diligence for the overseas buyer so as to ensure it has good standing / sound track record.
h) Such export advances shall not be permitted to be used to liquidate Rupee loans, which are classified as NPA as per the Reserve Bank of India asset classification norms.
i) Double financing for working capital for execution of export orders should be avoided.
j) Receipt of such advance of USD 100 million or more should be immediately reported to the Trade Division, Foreign Exchange Department, Reserve Bank of India , under copy to the concerned Regional Office of the Reserve Bank of India .
Warm regards,
Dr. S P Sharma
Chief Economist
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