Relaxation in Trade Credit Policy

Relaxation in Trade Credit Policy

Question: RBI relaxed norms for imports of Capital and non-capital goods by raising the trade credit limit to __.
(a) 150 Million Dollar under the automatic route
(b) 100 Million Dollar
(c) 125 Million Dollar
(d) 75 Million Dollar
Answer :(a)
Related Facts:

  • On 13 March 2019, Reserve Bank of India relaxed norms for imports of capital and non-capital goods by raising the trade credit limit to 150 million dollar under the automatic route.
  • Announcing the modified revised frame look for ‘Trade Credit Policy’, the RBI, however, reduced the all-inclusive cost (all-in-cost) for overseas loans to benchmark rate plus 250 basis points from the earlier 350 bps.

Trade Credit:

  • Trade credits (TCs) refer to the credits extended by the overseas supplier, bank, financial institution and other permitted recognized lenders for maturity for imports of capital and non-capital goods permissible.

Revision in framework:

  • According to the revised Framework, TCs upto 150 Million Dollar or equivalent per import transaction for oil and gas refining and marketing, airline and shipping companies can be availed under the automatic route.
  • For others, the limit us up to 50 million dollar or equivalent per import transaction.
  • Earlier, under the automatic route, banks were permitted to approve trade credit up to 20 million dollar.
  • TCs beyond 20 million dollar were required approval from the RBI.

Links:
https://www.business-standard.com/article/economy-policy/rbi-relaxes-norms-for-imported-goods-by-raising-trade-credit-to-150-mn-119031300904_1.html
https://economictimes.indiatimes.com/wealth/personal-finance-news/icici-bank-cuts-mclr-by-5-basis-points-home-loans-to-get-cheaper/articleshow/68685642.cms