RBI extends interest ceiling on trade credit till 30 September

The Reserve Bank of India (RBI) has decided to continue with the all-in-cost interest ceiling on trade credit for imports at 350 basis points over the London Interbank Offer Rate (LIBOR) till 30 September.

The period of availing trade credit for imports should be linked to the operating cycle and trade transaction period, RBI said in a clarification to dealer banks.

Importers can avail of trade credit at the existing all-in-cost ceiling till 30 September, after which it would be subject to review, RBI said.

In separate notification, the RBI also announced an extension of the rule of refinancing existing overseas borrowings by raising fresh external commercial borrowings till 30 September.

Accordingly, borrowers desirous of refinancing an existing ECB can raise fresh ECB at a higher all-in-cost/reschedule an existing ECB at a higher all-in-cost under the approval route subject to the condition that the enhanced all-in-cost does not exceed the all-in-cost ceiling prescribed as per the extant guidelines, RBI said.

All other aspects of ECB policy remain unchanged, it added.