The Reserve Bank of India (RBI) has issued a clarification regarding the treatment of loans extended to borrowers in the Agriculture and Micro, Small, and Medium Enterprises (MSME) sectors, where gold or silver is voluntarily pledged as collateral. Background As per existing norms, banks are required to provide collateral-free loans up to a prescribed limit…
Further to its earlier circulars, Reserve Bank of India has clarified on the provisions of hedging in the ECB framework vide its circular (A.P. (DIR Series) Circular No. 15) dated 07.11.2016. The circular provides clarity on hedging ‘External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency to bring uniformity in hedging practice in…
The recognized overseas ECB lenders who are able to mobilise Indian Rupees may extend Rupee denominated loans to Indian companies. The lenders may enter into back-to-back swap transaction with AD-Category-1 banks to facilitate Rupee denominated lending. The recognized non-resident lender (financier from abroad) approaches his overseas bank with a request for a swap rate for…
In simple terms, External Commercial Borrowings (ECB) means commercial borrowings availed (in the form of bank loans, trade credits, and securitized instruments) from external sources (from abroad) with a minimum average maturity of three years. The borrowings under ECB take place in two channels namely automatic route and approved routes. Eligible borrowers like Corporate Importers,…
Export finance plays a pivotal role in enabling businesses—particularly small and medium enterprises (SMEs)—to participate effectively in global trade. It encompasses various financial instruments designed to support exporters in managing working capital, mitigating risks, and maintaining liquidity throughout the export cycle. The following case studies illustrate how Indian companies from different sectors leveraged export finance…
The Import Data Processing and Monitoring System (IDPMS) is a centralized online platform developed by the Reserve Bank of India (RBI) to facilitate effective tracking, monitoring, and regulation of import transactions. Introduced to strengthen transparency and foreign exchange compliance, IDPMS plays a pivotal role in aligning import payments with the actual receipt of goods in…
Import finance plays a critical role in supporting Indian businesses engaged in international trade by facilitating the purchase of goods and services from overseas suppliers. These financial instruments and services ensure liquidity, reduce transaction risks, and enhance the competitiveness of importers. A variety of import finance options are available in India to cater to diverse…
Importers in India are required to comply with a comprehensive set of guidelines governed by the Foreign Trade Policy, the Reserve Bank of India (RBI), and customs regulations. These measures ensure transparency, regulatory compliance, and the orderly conduct of foreign exchange and trade transactions. Key regulatory requirements are outlined below: 1. Import Export Code (IEC)…
The Reserve Bank of India has relaxed rules for rescheduling/restructuring of ECBs by permitting an increase in the total cost of borrowing offshore. In suppression of earlier provisions, this year the banking regulator has delegated powers to the designated AD category-I banks to allow changes/modification in the draw-down and repayment schedules notwithstanding the average maturity period or…
The Export Data Processing and Monitoring System (EDPMS) is an online platform developed by the Reserve Bank of India (RBI) in 2014 to streamline, track, and monitor export transactions in India. It serves as a centralized system, integrating information from banks and customs authorities to ensure effective oversight of export shipments and the corresponding inward…
