Banks may use an Alternative reference rate in place of LIBOR for export/import transactions: RBI

RBI today notified AD category banks to use any other widely accepted/Alternative reference rate in the currency concerned for such transactions. “This is in view of the impending cessation of LIBOR as a benchmark rate, it has been decided to permit AD banks to use any other widely accepted/Alternative reference rate in the currency concerned,” the regulator said. All other instructions to extant Regulation 15 of Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 notified vide FEMA 23(R)/2015-RB dated January 12, 2016, and various directions issued to AD banks from time to time prescribing LIBOR linked interest payable in respect of export/import transactions shall remain unchanged, it said.

Foreign Exchange Management (Export of Goods and Services) (Amendment) Regulations, 2021 substitutes the following lines in the Principal Regulations, in Regulation 15, in sub-regulation 1, for clause (ii).

“ii) the rate of interest, if any, payable on the advance payment shall not exceed 100 basis points above the London Inter-Bank Offered Rate (LIBOR) or other applicable benchmarks as may be directed by the Reserve Bank, as the case may be; and”

“The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the FEMA, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law”, said RBI circular

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