May 28 :The Reserve Bank raised the interest rate ceiling on trade credits used for funding imports with maturity up to one year on Wednesday, making it easier for authorised dealer banks to fund such transactions.
The banks, as per the RBI notification, can provide short-term credit for funding import transactions up to 75 basis points over six months LIBOR (London Interbank Offer Rate) as against the existing 50 basis points.
However, the ceiling rate for funding long term imports transactions ranging between 1 and 3 years have been retained at 125 basis points over 6 months LIBOR.
The short term credit is used for payment of arranger fee, upfront fee, management fee, handling and processing charges, out-of-pocket and legal expenses pertaining to imports.
The RBI has permitted the authorised banks (ADs) to approve trade credits for imports in India up to USD 20 million per import transaction.Courtsey ; DD NEWS