RBI Relaxes Trade Credit Norms for Infrastructure Sector Imports
Current · Source: Reserve Bank of India · RBI/2012-13/337 · issued 11 Sep 2012 · ~2 min read
Quick answerRBI has eased the 'abinitio' buyers' credit condition from 15 months to 6 months for existing trade credits in the infrastructure sector, allowing more flexibility for import of capital goods. The 15-month condition remains for future trade credits.
The rule, in the simplest words
The RBI has reduced the minimum initial tenor for existing trade credits in the infrastructure sector from 15 months to 6 months
This change allows banks to restructure or extend existing trade credits with more flexibility
The 15-month condition still applies to new trade credits, and banks cannot issue guarantees or letters of credit for more than three years
How it plays out — a real example
A trade finance officer in Mumbai can now help an infrastructure company importing capital goods to restructure its existing trade credit with a shorter initial maturity of 6 months, giving the company more operational flexibility. This change can be especially helpful when the company needs to manage its cash flow more efficiently. The trade finance officer must ensure that the new terms comply with the RBI's guidelines and do not exceed the three-year cap on bank instruments.
What changed
RBI reduced the minimum initial tenor for existing trade credits from 15 months to 6 months, applicable only to infrastructure sector companies importing capital goods. The 15-month 'abinitio' condition continues to apply for new trade credits. AD banks remain barred from issuing Letters of Credit, guarantees, LoUs, or LoCs for periods beyond three years.
What it means for you
Banks can now process restructuring or extension of existing trade credits with a shorter initial maturity of 6 months, offering more operational flexibility to infrastructure borrowers. However, the stricter 15-month condition for new trade credits and the three-year cap on bank instruments remain unchanged, so lenders must carefully distinguish between existing and new facilities.
What you must do
Update internal trade credit policies to reflect the reduced 6-month 'abinitio' condition for existing infrastructure sector trade credits.
Ensure clear segregation of existing versus new trade credit applications to apply the correct minimum tenor condition.
Continue to comply with the prohibition on issuing Letters of Credit, guarantees, LoUs, or LoCs for periods beyond three years.
Communicate the revised guidelines to relevant relationship managers and trade finance teams handling infrastructure sector accounts.
Who it affects
AD Category-I banks handling trade credit for infrastructure sector imports, Infrastructure companies importing capital goods under trade credit, Trade finance and credit teams in banks
❓ Common questions
Does this relaxation apply to all trade credits or only infrastructure sector?
The relaxation applies only to trade credits for infrastructure sector companies importing capital goods, as defined under ECB guidelines.
Can we now issue Letters of Credit for periods beyond three years?
No, the prohibition on issuing Letters of Credit, guarantees, LoUs, or LoCs for periods beyond three years remains unchanged.
What is the 'abinitio' condition for new trade credits after this circular?
For new trade credits, the 'abinitio' buyers' credit condition of 15 months continues to apply.
📜 Read the original circular — full text as issued by RBI
RBI/2012-13/337
A.P. (DIR Series) Circular No. 59
December 14 , 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 A.P. (DIR Series) Circular No. 28 dated September 11, 2012 .
2. As per extant guidelines on Trade Credit the companies in the infrastructure sector , where “infrastructure” is as defined under the extant guidelines on External Commercial Borrowings (ECB) are allowed 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 that (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.
3. On review, it has been decided to further relax the condition of 'abinitio' buyers' credit for 15 (fifteen) months to 6 (six) months for existing trade credits . However, the condition regarding 'abinitio' buyers' credit for 15 months shall continue for future trade credit.
4. 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.
5. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
6. 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
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2012-13/337 · issued 11 Sep 2012. The plain-English explanation above is BankPulse’s own independent summary.
Ensure clear segregation of existing versus new trade credit applications to apply the correct minimum tenor condition.
📜 Compliance
Update internal trade credit policies to reflect the reduced 6-month 'abinitio' condition for existing infrastructure sector trade credits.
Continue to comply with the prohibition on issuing Letters of Credit, guarantees, LoUs, or LoCs for periods beyond three years.
Communicate the revised guidelines to relevant relationship managers and trade finance teams handling infrastructure sector accounts.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks handling trade credit for infrastructure sector imports, Infrastructure companies importing capital goods under trade credit, Trade finance and credit teams in banks), your first concrete step on “RBI Relaxes Trade Credit Norms for Infrastructure Sector Imports” is: “Update internal trade credit policies to reflect the reduced 6-month 'abinitio' condition for existing infrastructure sector trade credits.” (RBI issued this 11 Sep 2012).
Action required: Update internal trade credit policies to reflect the reduced 6-month 'abinitio' condition for existing infrastructure sector trade credits.
Action required: Ensure clear segregation of existing versus new trade credit applications to apply the correct minimum tenor condition.
Action required: Continue to comply with the prohibition on issuing Letters of Credit, guarantees, LoUs, or LoCs for periods beyond three years.
Action required: Communicate the revised guidelines to relevant relationship managers and trade finance teams handling infrastructure sector accounts.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
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.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
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=7755&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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