Norms eased to allow long-term loan to exporters

Tags: News

RBI takes step to aid projects stuck due to shortage of funds

The Reserve Bank of India (RBI) on Wednesday allowed banks to offer long-term export advances to exporters for up to 10 years for execution of long-term supply contracts.

These long-duration loans will help exporters access capital to fulfill long-term contracts. Existing norms allow banks to give loans for up to one year only. The RBI move will help turn around many turnkey projects that have been stuck for want of funds.

RBI said in view of requests received from exporters, it decided to permit banks to allow exporters having a minimum of three years’ satisfactory track record to receive long-term export advances for up to 10 years to be utilised for execution of long-term supply contracts for export of goods.

M Rafeeque Ahmed, president of the Federation of Indian Export Organisations (Fieo), said it would help exporters have steady capital flow for implementing turnkey projects in the infrastructure space.

“A number of companies will benefit from the move and help long-term deferred payments of exporters,” he said.

However, RBI put cond­itions that the borrower firm should have capacity, systems and processes in place to ensure that the orders of the said tenure can actually be executed.

Such advances should be adjusted against future exports, RBI said.

The facility will be extended only to those entities that have not come under adverse notice of the enforcement directorate or any such regulatory agency or have not been cautioned.

The rate of interest payable, if any, should not exceed Libor plus 200 basis points, RBI said.

The central bank said such export advances would not be permitted to be used to liquidate rupee loans classified as non-performing assets as per RBI’s asset classification norms. Double financing for working capital for execution of export orders should be avoided, it said.

Receipt of such advances worth $100 million or more should be immediately reported to RBI.

Upasana Bhardwaj, economist at ING Vysya Bank, said exporters should have a minimum of three years’ satisfactory track record to avail such long-term advances provided there were irrevocable supply orders in place and the export contract clearly specified the nature, amount and delivery timelines of the products.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • India must follow China on its path to the future

    There are many theories, real and imagined, doing the rounds in the national and international media about Barack Obama’s overtures to ‘rebalance

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Arun Nigavekar

Will the adventurous UGC succeed?

The impact of the Modi government on the education sector ...

Zehra Naqvi

The urge to tell stories

One wants to tell a story, like Scheherzade, in order ...

Dharmendra Khandal

Don’t interfere with nature

Just before we celebrated the news of tiger numbers swelling, ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture