Mumbai: The Reserve Bank of India (RBI) on Tuesday relaxed rules for banks to provide trade credit for import of capital goods to India by making the facility available to companies across all sectors.
Companies can now avail trade credit of up to $20 million (around Rs125 crore) for a period up to five years for import of capital goods, RBI said in a notification. Earlier, only infrastructure companies were allowed such credit.
"On a review, it has been decided to allow companies in all sectors to avail of trade credit not exceeding $20 million up to a maximum period of five years for import of capital goods," RBI said.
Capital goods refer to any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly. It also includes packaging machinery and equipment, power generating sets and machine tools among other things.
RBI has also relaxed the ab-initio (from the beginning) contract period of 15 months for all trade credits to six months, RBI said.
The new rules are applicable with immediate effect.
Banks are, however, not permitted to issue letters of credits and guarantees in favour of an overseas supplier, bank and financial institution beyond three years, RBI said.
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