RBI notifies increased tenor of gold loan for re-exporters

The Reserve Bank of India (RBI) has notified an increase in the tenor of gold loan, or stand-by letter of credit, offered by banks for import and re-export of gold to 270 days from the previous 240 days.

Accordingly, re-exporters should complete the process of manufacture and export within 90 days, instead of the 60 days prescribed earlier, RBI said in a notification.

As per the Foreign Trade Policy 2004-2009, the RBI had, on 18 February 2005, notified the maximum tenor of gold loan as 240 days, consisting of 60 days for manufacture and exports and 180 days for fixing the price and repayment of gold loan.

The Hand Book of Procedures of the Foreign Trade Policy 2009-14 states that the re-export of gold has to be done in 90 days against the 60 days allowed under the earlier FTP.

''The export has to be completed within a maximum period of 90 days from the date of release of gold on loan basis,'' it says, adding, " the exporter shall have flexibility to fix the price and repay gold loan within 180 days from date of export".

Accordingly, the maximum term of gold loan becomes 270 days at present (ie, 90 days for manufacture and export + 180 days for fixing the price and repayment) as per FTP 2009-14.

All other terms and conditions for import and re-export of gold remain changed, RBI said in a notification to authorised foreign exchange dealer banks in the country.