What changed
Previously, AD Category-I banks could approve trade credit up to USD 20 million per import transaction with a maturity of up to one year (three years for capital goods) for imports under DGFT policy. Now, for imports of platinum, palladium, rhodium, and silver specifically, the maximum credit period (including LC usance) is capped at 90 days from the date of shipment. This revision takes effect immediately.
What it means for you
Importers of these precious metals will face tighter working capital cycles, as they can no longer stretch payment beyond 90 days. Banks must recalibrate their trade finance products for these commodities and strengthen due diligence to prevent misuse for interest or currency arbitrage. The move signals RBI's intent to curb speculative imports and manage forex outflows.
What you must do
- Update internal trade credit policies to cap suppliers' and buyers' credit for platinum, palladium, rhodium, and silver imports at 90 days from shipment.
- Ensure all LC usance periods for these metals comply with the new 90-day limit; revise system parameters accordingly.
- Strengthen KYC/AML checks and transaction monitoring for these imports, flagging any large or sudden volume increases.
- Communicate the revised tenor to all constituents, including SEZ units and export-oriented units, advising them to adjust procurement plans.
- Review existing credit approvals for these metals and align them with the circular immediately.
Who it affects
AD Category-I banks handling trade credit for precious metal imports, Importers of platinum, palladium, rhodium, and silver, Units in SEZs and export-oriented units dealing with these metals, Trade finance and compliance teams at banks
Does this 90-day cap apply to all imports of these metals, or only those under trade credit?
The circular specifically restricts suppliers' and buyers' credit, including the usance period of Letters of Credit, for importing platinum, palladium, rhodium, and silver to 90 days from shipment. Other import payment methods (e.g., advance remittance) are not directly covered, but banks must ensure overall compliance with FEMA.
What happens if a bank had already approved a trade credit with a tenor longer than 90 days before this circular?
The circular states the revised directions come into force with immediate effect. Banks should review existing approvals and, where possible, renegotiate or restructure them to comply. If not feasible, consult RBI or legal counsel, as the circular does not provide a grandfathering clause.
Are there any exceptions for capital goods imports of these metals?
No. The circular explicitly overrides the general capital goods exception (which allowed up to three years) for these four metals. All trade credit for platinum, palladium, rhodium, and silver is now capped at 90 days, regardless of the nature of the goods.