Home › Circulars › RBI/2012-13/202

RBI Extends Trade Credit Tenure for Infrastructure Sector Capital Goods Imports

Current · Source: Reserve Bank of India · RBI/2012-13/202 · issued 11 Sep 2012 · ~2 min read
Quick answerRBI now allows infrastructure companies to avail trade credit up to five years for importing capital goods, up from the earlier limit of more than one year and less than three years. AD banks can approve trade credits up to USD 20 million per import transaction for capital goods, but cannot issue Letters of Credit or guarantees beyond three years.
The rule, in the simplest words
How it plays out — a real example

A forex & trade-finance officer in Indore, Priya, reviews a loan request from a solar power company importing solar panels worth $15 million. She approves a 4-year trade credit because the company qualifies as an infrastructure firm, but she ensures the bank's letter of credit expires in 3 years, not 4, as per RBI rules.

What changed

Previously, trade credit for capital goods imports was allowed for a maturity period of more than one year and less than three years for all sectors. Now, infrastructure sector companies can avail trade credit for up to five years, provided the credit is initially contracted for at least fifteen months and not structured as short-term rollovers. AD banks are still prohibited from issuing Letters of Credit, guarantees, LoUs, or LoCs for the extended period beyond three years.

What it means for you

This change gives infrastructure firms more breathing room to finance expensive capital goods imports with longer repayment timelines, easing working capital pressure. Banks must carefully assess the creditworthiness of borrowers for the extended tenure and ensure compliance with the no-rollover condition. The all-in-cost ceiling for the three-to-five-year bucket is set at 350 basis points over six-month LIBOR, matching the rate for one-to-three-year credits.

What you must do

Who it affects

AD Category-I banks approving trade credits for capital goods imports, Infrastructure sector companies importing capital goods, Trade finance and credit risk teams in banks

❓ Common questions

Can AD banks issue Letters of Credit for the full five-year trade credit period?

No. AD banks are not permitted to issue Letters of Credit, guarantees, LoUs, or LoCs for the extended period beyond three years. The bank's credit instrument must be co-terminus with the credit period only up to three years.

What is the all-in-cost ceiling for trade credits with a maturity of more than three years and up to five years?

The all-in-cost ceiling is 350 basis points over six-month LIBOR (or the applicable benchmark for the currency of credit), which is the same as the ceiling for credits with maturity of more than one year and up to three years.

Does this circular apply to all sectors or only infrastructure?

The extended five-year tenure applies only to companies in the infrastructure sector as defined under the extant ECB guidelines. For all other sectors, the existing three-year limit remains unchanged.

📜 Read the original circular — full text as issued by RBI
Notifications - Reserve Bank of India Skip to main content Selected Selected Change Language हिंदी Search the Website Search Home About Us ▼ About Us Organisation & Functions ▶ Organisation Structure Departments Offices Training Establishment ▶ College of Agricultural Banking Reserve Bank Staff College College of Supervisors RBI's Functions and Working Governors Deputy Governors Executive Directors Communication Policy of RBI Sources of Information ▶ Annual Publications Half-yearly Publications Quarterly Publications Monthly Publications Weekly Publications Occasional Publications SDDS NSDP Data Releases Publications available on Subscription General Information RBI History Museum ▶ The RBI Museum RBI Monetary Museum Notification ▼ Notifications Master Directions Master Circulars Amendment Directions Draft Notifications/Guidelines ▶ Draft Notifications/Guidelines Draft Directions (RE-wise) Index To RBI Circulars Standalone Circulars Circulars Withdrawn Press Releases Speeches & Media Interactions ▼ Speeches Media Interactions Memorial Lectures Podcasts Publications ▼ Biennial Annual Half-Yearly Quarterly Bi-monthly Monthly Weekly Occasional Reports Working Papers Legal Framework ▼ Act Rules Regulations Schemes Research ▼ External Research Schemes RBI Occasional Papers Working Papers RBI Bulletin History DRG Studies KLEMS State Statistics and Finances Statistics ▼ Data Releases Database on Indian Economy Public Debt Statistics Regulatory Reporting ▼ List of Returns Data Definition Validation rules/ Taxonomy List of RBI Reporting Portals FAQs of RBI Reporting Portals Home Notifications Notifications Withdrawn with effect from November 16, 2021, February 18, 2022, May 02, 2022, May 13, 2022, May 21, 2024, July 12, 2024 & October 01, 2024 ( 517 kb ) Trade Credits for Import into India RBI/2012-13/202 A.P. (DIR Series) Circular No. 28 September 11, 2012 To, All Category - I Authorised Dealer Banks Madam / Sir, Trade Credits for Import into India Attention of Authorized Dealer Category - I (AD Category - I) banks is invited to A.P. (DIR Series) Circular No. 87 dated April 17, 2004 and A.P. (DIR Series) Circular No. 24 dated November 01, 2004 . 2. As per the extant guidelines, for import of capital goods as classified by DGFT, AD banks may approve trade credits up to USD 20 million per import transaction with a maturity period of more than one year and less than three years (from the date of shipment). No roll-over/extension is permitted beyond the permissible period. AD banks are also permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) in favour of overseas supplier, bank and financial institution, up to USD 20 million per transaction for a period up to three years for import of capital goods, subject to prudential guidelines issued by the Reserve Bank from time to time. The period of such Letters of credit / guarantees / LoU / LoC has to be co-terminus with the period of credit, reckoned from the date of shipment. AD banks shall not, however, approve trade credit exceeding USD 20 million per import transaction. 3. On a review, it has been decided to allow companies in the infrastructure sector, where “infrastructure” is as defined under the extant guidelines on External Commercial Borrowings (ECB) to avail of trade credit up to a maximum period of five years for import of capital goods as classified by DGFT subject to the following conditions: - (i) the trade credit must be abinitio contracted for a period not less than fifteen months and should not be in the nature of short-term roll overs; and (ii) AD banks are not permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) in favour of overseas supplier, bank and financial institution for the extended period beyond three years . 4. The all-in-cost ceilings of trade credit will be as under: Maturity period All-in-cost ceilings over 6 months LIBOR* Up to one year 350 basis points More than one year and up to three years More than three years and up to five years * for the respective currency of credit or applicable benchmark The all-in-cost ceilings include arranger fee, upfront fee, management fee, handling/ processing charges, out of pocket and legal expenses, if any. 5. All other aspects of Trade Credit policy will remain unchanged and should be complied with. The amended trade credit policy will come into force with immediate effect and is subject to review based on the experience gained in this regard. 6. Necessary amendments to the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 dated May 3, 2000 are being issued separately wherever necessary. 7. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers concerned. 8. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (Rashmi Fauzdar) Chief General Manager 2026 All Months January February March April May June July August September October November December 2025 All Months January February March April May June July August September October November December 2024 All Months January February March April May June July August September October November December 2023 All Months January February March April May June July August September October November December 2022 All Months January February March April May June July August September October November December 2021 All Months January February March April May June July August September October November December 2020 All Months January February March April May June July August September October November December 2019 All Months January February March April May June July August September October November December 2018 All Months January February March April May June July August September October November December 2017 All Months January February March April May June July August September October November December Archives 2016 All Months January February March April May June July August September October November December 2015 All Months January February March April May June July August September October November December 2014 All Months January February March April May June July August September October November December 2013 All Months January February March April May June July August September October November December 2012 All Months January February March April May June July August September October November December 2011 All Months January February March April May June July August September October November December 2010 All Months January February March April May June July August September October November December 2009 All Months January February March April May June July August September October November December 2008 All Months January February March April May June July August September October November December 2007 All Months January February March April May June July August September October November December 2006 All Months January February March April May June July August September October November December 2005 All Months January February March April May June July August September October November December 2004 All Months January February March April May June July August September October November December 2003 All Months January February March April May June July August September October November December 2002 All Months January February March April May June July August September October November December 2001 All Months January February March April May June July August September October November December 2000 All Months January February March April May June July August September October November December 1999 All Months January February March April May June July August September October November December 1998 All Months January February March April May June July August September October November December 1997 All Months January February March April May June July August September October November December 1996 All Months January February March April May June July August September October November December 1995 All Months January February March April May June July August September October November December 1994 All Months January February March April May June July August September October November December 1993 All Months January February March April May June July August September October November December 1992 All Months January February March April May June July August September October November December 1991 All Months January February March April May June July August September October November December Top Back to previous page More Links Bank Holidays Banking Glossary Citizen's Charter Complaints Contact Us COVID-19 Measures E-LMS Events FAQs Financial Education Forms IFSC/MICR Codes Important Websites Opportunities @ RBI RBI Clarifications RBI Kehta Hai RBI’s Vision and Values (1257 kb)--> Right to Information Act Tenders Follow RBI RSS Twitter YouTube Instagram Facebook LinkedIn © Reserve Bank of India. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2012-13/202 · issued 11 Sep 2012. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
💻 IT / Systems
  • Update internal trade credit approval policies to include the five-year option for infrastructure sector borrowers importing capital goods.
📜 Compliance
  • Verify that the borrower qualifies as an infrastructure company as per the extant ECB definition before approving the extended tenure.
  • Ensure that any Letters of Credit, guarantees, LoUs, or LoCs issued do not extend beyond three years, even if the underlying trade credit is for five years.
  • Monitor compliance with the condition that the trade credit is contracted ab initio for at least fifteen months and not rolled over.
  • Communicate the revised guidelines to your trade finance and relationship teams handling infrastructure clients.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are an IT/Systems lead at a bank this circular applies to (AD Category-I banks approving trade credits for capital goods imports, Infrastructure sector companies importing capital goods, Trade finance and credit risk teams in banks), your first concrete step on “RBI Extends Trade Credit Tenure for Infrastructure Sector Capital Goods Imports” is: “Update internal trade credit approval policies to include the five-year option for infrastructure sector borrowers importing capital goods.” (RBI issued this 11 Sep 2012).

  1. Circular: RBI/2012-13/202 -- RBI Extends Trade Credit Tenure for Infrastructure Sector Capital Goods Imports
  2. Issued: 11 Sep 2012
  3. Action required: Update internal trade credit approval policies to include the five-year option for infrastructure sector borrowers importing capital goods.
  4. Action required: Verify that the borrower qualifies as an infrastructure company as per the extant ECB definition before approving the extended tenure.
  5. Action required: Ensure that any Letters of Credit, guarantees, LoUs, or LoCs issued do not extend beyond three years, even if the underlying trade credit is for five years.
  6. Action required: Monitor compliance with the condition that the trade credit is contracted ab initio for at least fifteen months and not rolled over.
  7. Action required: Communicate the revised guidelines to your trade finance and relationship teams handling infrastructure clients.
  8. Owner: ____________ Target date: ____________
  9. Board/committee approval needed? Y / N
  10. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7559&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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