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| {: Income-producing real estate (IPRE) refers to a method of providing funding \nto real estate (such as, office buildings to let, retail space, multifamily \nresidential buildings, industrial or warehouse space, and hotels) where the \nprospects for repayment and recovery on the exposure depend primarily on \nthe cash flows generated by the asset. The primary source of these cash flows \nwould generally be lease or rental payments or the sale of the asset. The \nborrower may be, but is not required to be, an SPE (Special Purpose Entity), \nan operating company focused on real estate construction or holdings, or an \noperating company with sources of revenue other than real estate. The \ndistinguishing characteristic of IPRE versus other corporate exposures that are \ncollateralised by real estate is the strong positive correlation between the \nprospects for repayment of the exposure and the prospects for recovery in the \nevent of default, with both depending primarily on the cash flows generated by \na property\} |
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| {: Infrastructure Lending.\} |
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| {: deemed advance” \nand any other form of funded or non-funded facility. \n136. Take-out Financing \nThe bank shall be guided by the Reserve Bank of India (Commercial Banks – Transfer \nand Distribution of Credit Risk) Directions, 2025 for instruction related to take- out \nfinancing. \n137. \n21[*****] \n137A. Lending to InvITs \nThe bank shall lend to InvITs subject to the following conditions: \n(1) A bank shall put in place a Board approved policy on exposures to InvITs which \nshall inter alia cover the appraisal mechanism, sanctioning conditions, internal \nlimits, monitoring mechanism, etc. \n(2) Without prejudice to generality, a bank shall undertake assessment of all critical \nparameters including sufficiency of cash flows at InvIT level to ensure timely \ndebt servicing. The overall leverage of the InvITs and the underlying SPVs put \ntogether shall be within the permissible leverage as per the Board approved \npolicy of the bank. A bank shall also monitor performance of the underlying \nSPVs on an ongoing basis as ability of the InvITs to meet their debt obligation \nwill largely depend on the performance of these SPVs. As InvITs are trusts, a \nbank shall keep in mind the legal provisions in respect of these entities \nespecially those regarding enforcement of security. \n(3) A bank shall lend to only those InvITs where none of the underlying SPVs, \nwhich have existing bank loans, is facing ‘financial difficulty’ as defined in the \n \n21 Deleted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 |
| textReserve Bank of India (Commercial Banks – Resolution of Stressed Assets) \nDirections, 2025. \n(4) 22[Bank finance to InvITs for acquiring equity of other entities shall be subject \nto the relevant conditions given in Chapter XI – Acquisition Finance]. \n(5) The Audit Committee of the Board of the bank shall review the compliance to \nthe above conditions on a half yearly basis. \nC. Appraisal \n138. In respect of financing of infrastructure projects undertaken by Government \nowned entities, the bank shall undertake due diligence on the viability of the \nprojects. The bank shall ensure that the individual components of financing and \nreturns on the project are well defined and assessed. State Government \nguarantees shall not be taken as a substitute for satisfactory credit appraisal and \nsuch appraisal requirements shall not be diluted on the basis of any reported \narrangement with the Reserve Bank or any bank for regular standing instructions \n/ periodic payment instructions for servicing the loans / bonds. \n139. Infrastructure projects are often financed through Special Purpose Vehicles. \nFinancing of these projects shall, therefore, call for distinct appraisal methodology \non the part of lending agencies. Identification of various project risks, evaluation of \nrisk mitigation through appraisal of project contracts and evaluation of \ncreditworthiness of the contracting entities and their abilities to fulfil contractual \nobligations shall be an integral part of the appraisal exercise. In this connection, \nthe bank shall consider constituting appropriate screening committees / special \ncells for appraisal of credit proposals and monitoring the progress / performance \nof the projects. Often, the size of the funding requirement would necessitate joint \nfinancing by banks or financial institutions or financing by more than one bank \nunder consortium or syndication arrangements. In such cases, the participating \nbank shall, for the purpose of their own assessment, refer to the appraisal report \nprepared by the lead bank or financial institutions or have the project appraised \njointly. \n \n22 Modified with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 |
| textD. Prudential requirements \n140. For prudential credit exposure limits, the bank shall be guided by Reserve Bank \nof India (Commercial Banks – Concentration Risk Management) Directions, 2025\n \n \n \n \n. \n141. For assignment of risk weight for capital adequacy purposes, the bank shall be \nguided by the Reserve Bank of India (Commercial Banks – Prudential Norms on \nCapital Adequacy) Directions, 2025. \n142. Asset-Liability Management \nThe long-term financing of infrastructure projects may lead to asset – liability \nmismatches, particularly when such financing is not in conformity with the maturity \nprofile of a bank’s liabilities. The bank shall, therefore, exercise due caution on their \nasset-liability position to ensure that they do not run into liquidity mismatches on \naccount of lending to such projects. \n143. Administrative arrangements \nTimely and adequate availability of credit is the pre-requisite for successful \nimplementation of infrastructure projects. The bank shall, therefore, clearly delineate \nthe procedure for approval of loan proposals and institute a suitable monitoring \nmechanism for reviewing applications pending beyond the specified period. \nMultiplicity of appraisals by every institution involved in financing, leading to delays, \nhas to be avoided and the bank shall be prepared to broadly accept technical \nparameters laid down by leading public financial institutions. Also, setting up a \nmechanism for an ongoing monitoring of the project implementation will ensure that \nthe credit disbursed is utilised for the purpose for which it was sanctioned. |
| textChapter X - Discounting / Rediscounting of Bills \nA bank shall adhere to the following guidelines while purchasing / discounting / \nnegotiating / rediscounting of genuine commercial / trade bills: \n144. A bank shall sanction working capital limits as also bills limit to borrowers, only \nafter proper appraisal of their credit needs and in accordance with the Board \napproved policy. \n145. The procedure for Board approval shall include banks’ core operating process \nfrom the time the bills are tendered till these are realised. The bank shall review \ntheir core operating processes and simplify the procedure in respect of bills \nfinancing. In order to address the often-cited problem of delay in realisation of bills, \nthe bank shall utilize improved computer / communication networks like the \nStructured Financial Messaging system (SFMS) and adopt the system of ‘value \ndating’ of their clients’ accounts. \n146. A bank shall purchase / discount / negotiate bills under LCs only in respect of \ngenuine commercial and trade transactions of their borrower constituents who \nhave been sanctioned regular credit facilities by the banks. The bank shall not, \ntherefore, extend such facilities to non-constituent borrower or / and non-\nconstituent member of a consortium / multiple banking arrangement. However, in \ncases where negotiation of bills drawn under LC is restricted to a particular bank, \nand the beneficiary of the LC is not a constituent of that bank, the bank concerned \nmay negotiate such an LC, subject to the condition that the proceeds shall be \nremitted to the regular banker of the beneficiary. The prohibition regarding \nnegotiation of unrestricted LCs of non-constituents shall continue to be in force. \n147. Sometimes, a beneficiary of the LC may want to discount the bills with the LC \nissuing bank itself. In such cases, the bank shall discount bills drawn by beneficiary \nonly if the bank has sanctioned regular fund- based credit facilities to the \nbeneficiary. With a view to ensuring that the beneficiary’s bank is not deprived of \ncash flows into its account, the beneficiaries should get the bills discounted / \nnegotiated through the bank with whom it is enjoying sanctioned credit facilities. \n148. Bills purchased / discounted / negotiated under LC (where the payment to the \nbeneficiary is not made ‘under reserve’) shall be treated as an exposure on the LC \nissuing bank and not on the borrower. All clean negotiations as indicated above |
| textshall be assigned the risk weight as is normally applicable to inter-bank exposures, \nfor capital adequacy purposes. In the case of negotiations ‘under reserve’, the \nexposure shall be treated as on the borrower and risk weight assigned accordingly. \nHowever, in cases where the bills discounting / purchasing / negotiating bank and \nLC issuing bank are part of the same bank, i.e. where LC is issued by the Head \nOffice or branch of the same bank, then the exposure shall be taken on the third \nparty / borrower and not on the LC issuing bank. \n149. While purchasing / discounting / negotiating bills under LCs or otherwise, banks \nshall establish genuineness of underlying transactions / documents. \n150. The bank shall ensure that blank LC forms are kept in safe custody as in case \nof security items like blank cheques, demand drafts etc. and verified / balanced on \ndaily basis. LC forms shall be issued to customers under joint signatures of the \nbank’s authorised officials. \n151. The practice of drawing bills of exchange claused ‘without recourse’ and issuing \nletters of credit bearing the legend ‘without recourse’ shall be discouraged because \nsuch notations deprive the negotiating bank of the right of recourse it has against \nthe drawer under the Negotiable Instruments Act. The bank shall negotiate bills \ndrawn under LCs, on either a ‘with recourse ‘or ‘without recourse ‘basis, based on \ntheir perception about the credit worthiness of the LC issuing bank. However, the \nbank shall not purchase / discount other bills (the bills not drawn under LC) on a \n‘without recourse ‘basis. \n152. The bank shall not purchase / discounted / negotiate accommodation bills. The \nunderlying trade transactions shall be clearly identified, and a proper record \nthereof maintained at the branches conducting the bills business. \n153. The bank shall be circumspect while discounting bills drawn by front finance \ncompanies set up by large industrial groups on other group companies. \n154. Bills rediscount shall be restricted to usance bills held by other banks. The bank \nshall not rediscount bills earlier discounted by non-bank financial companies \n(NBFCs) except in respect of bills arising from sale of light commercial vehicles \nand two / three wheelers. \n155. The bank shall exercise its commercial judgment in discounting of bills of the \nservices sector. However, while discounting such bills, the bank shall ensure that |
| textactual services are rendered, and accommodation bills are not discounted. \nServices sector bills shall not be eligible for rediscounting. Further, providing \nfinance against discounting of services sector bills shall be treated as unsecured \nadvance and, therefore, shall be within the norm prescribed by the Board of the \nbank for unsecured exposure limit. \n156. In order to promote payment discipline which would, to a certain extent, \nencourage acceptance of bills, all corporates and other constituent borrowers \nhaving turnover above threshold level as fixed by the bank’s Board of Directors \nshall be mandated to disclose ‘aging schedule’ of their overdue payables in their \nperiodical returns submitted to banks. \n157. The bank shall not enter into Repo transactions using bills discounted / \nrediscounted as collateral. |
| textChapter XI - Acquisition Finance \nA. 23[***** \n158. ***** \n159. ***** \n160. ***** \n161. ***** \n162. ***** \n163. ***** \n164. ***** \n165. ***** \nB. ***** \n166. ***** \n167. ***** \n168. ***** \n169. ***** \nC. ***** \n170. *****] \n24[ \n170A. Without prejudice to the provisions of Foreign Exchange Management Act, \n1999 and the rules and regulations framed thereunder, acquisition finance may be \nextended by a bank to an Indian non-financial company to acquire ‘control’, or to \nincrease its stake towards acquiring ‘control’, over a domestic or foreign non-\nfinancial target company as strategic investment – i.e., an investment driven by the \n \n23 Deleted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 \n24 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 |
| textcore objective of creating long-term value for the acquirer through potential \nsynergies, rather than mere financial restructuring for short-term gains. \n170B. In cases where acquiring control in a target company leads to control over \nmultiple companies due to control of such companies by the target company, the \ncriteria of potential synergy must be suitably assessed considering all such \ncompanies. \n Provided that, acquisition finance shall not be extended to an acquiring company \nfor acquisition of a non-financial target company, which has one or more financial \nentities as subsidiaries or Joint Ventures. \n170C. Acquisition finance may also be provided by banks to refinance existing \nacquisition debt of an acquiring company, subject to compliance with the provisions \nof these Directions and prudential requirements as specified in paragraph 6(12) of \nReserve Bank of India (Commercial Banks – Resolution of Stressed Assets) \nDirections, 2025, at the time of refinance. \n Provided that, refinance of acquisition finance can take place only when the \nacquisition finance has been concluded in all aspects, resulting in establishment of \ncontrol of the target company by the acquiring company. \nProvided further that, the refinance shall not be used for repayment of acquiring \ncompany’s contribution or for any purpose other than the retirement of the \nacquisition finance debt. \nD. Board approved policy \n170D. Banks shall put in place a Board approved policy on acquisition finance, suitably \nincorporating the underwriting benchmarks that address the structural complexities \nof such transactions, in particular relating to exposure limits, equity contribution, \nleverage multiples, and cash-flow certainty. \nE. Eligible Entities and Conditions \n170E. Acquisition finance can be extended: \n(1) to the acquiring company for acquisition of target company directly by it; or |
| text(2) to the acquiring company, for on-lending to a non-financial subsidiary \nincorporated in India or overseas for acquisition of a target company by such \na subsidiary; or \n \n \n(3) to an existing non-financial subsidiary of the acquiring company \nincorporated in India or overseas, on the strength of the acquiring company; \nor \n(4) to a step-down special purpose vehicle (SPV) set up by the acquiring \ncompany singly or jointly with another non-financial company, in India or \noverseas specifically for the purpose, provided that the SPV has no \nbusiness purpose other than the acquisition and holding of the target. This \nshall be without prejudice to the extant norms relating to Core Investment \nCompanies. \nProvided that, where the acquiring company holds less than a majority of voting \nrights in a SPV or its subsidiary through which acquisition is being done, \nacquisition finance shall be permitted only if: \n(a) the acquiring company holds the single largest voting block in the SPV or \nsubsidiary, as the case may be; and, \n(b) no other shareholder or group of shareholders acting in concert holds rights \nthat could override or veto the acquiring company's control over the SPV \nor subsidiary. \n170F. Acquisition finance shall be subject to the following conditions: \n(1) Financial criteria of acquiring company: \n170G. The acquiring company (or, where acquisition is through an SPV or subsidiary, \nthe acquiring company controlling such SPV or subsidiary) shall meet the following \nfinancial criteria at the time of sanctioning the acquisition finance: \n(i) \nIf listed on a recognized stock exchange in India: (a) Minimum net worth \nof ₹500 crore; and (b) Net profit after taxes reported in each of the \nprevious three consecutive financial years. \n(ii) \nIf unlisted: (a) Minimum net worth of ₹500 crore; (b) Net profit after taxes \nreported in each of the previous three consecutive financial years, and \n(c) an investment grade rating (BBB- or above) from a credit rating"} |
| {"text": "agency. If there is no rating available for the acquiring company at the \ntime of sanction, it shall have to be obtained prior to disbursement of \nacquisition finance. \nExplanation: \n(i) \nThe above financial criteria of the acquiring company shall be examined \nat consolidated as well as standalone levels. \n(ii) \nNet Worth shall be computed in accordance to the provisions of Section \n2(57) of the Companies Act 2013. \n(2) Credit Assessment and Financing Conditions \n170H. Credit assessment shall be conducted on a pro-forma consolidated basis, \nincorporating the financials of the acquiring company and the financials of the \ntarget company on a consolidated basis. \n170I. Total bank financing shall not exceed 75 per cent of the acquisition value, as \nindependently assessed by the bank as under: \n(1) \nListed Company: Valuation as determined by one independent valuer (to \nbe appointed by the bank) as per para 8 (2) (e) of SEBI (Substantial \nAcquisition of Shares and Takeovers) Regulations, 2011 (‘SEBI SAST \nRegulations’) for valuing shares not frequently traded (using valuation \nparameters including, book value, comparable trading multiples, and such \nother parameters as are customary for valuation of shares of such \ncompanies); \n(2) \nUnlisted company: Lower of the valuation determined by two independent \nvaluers (to be appointed by the bank) as per para 8 (2) (e) of SEBI SAST \nRegulations, 2011 for valuing shares not frequently traded (using valuation \nparameters including, book value, comparable trading multiples, and such \nother parameters as are customary for valuation of shares of such \ncompanies). \n170J. The acquiring company must contribute the remaining amount out of its own \nfunds. \nExplanation"} |
| {"text": "(i) \nOwn funds, for this purpose, shall mean funds demonstrably sourced from \nthe acquiring company's internal accruals, sale of assets or redemption of \ninvestments, or issuance of fresh equity. \n(ii) \nProceeds of any borrowing; or any instrument that carries a fixed repayment \nobligation or a put option exercisable by the investor; or any intragroup \nfunding where the source entity has itself borrowed to make the contribution, \nshall not constitute own funds. \nProvided that, the acquiring company, if listed, may utilise bridge finance to satisfy \nthe minimum own funds requirement, subject to the following: \na. \nthe repayment of the bridge finance must be only through internal accruals \nor an equity issue or asset sales, within a specified period (maximum 12 \nmonths). \nb. \nif the bridge finance is provided by a bank, it shall be on a secured basis. \nc. \nBridge finance should not result in dilution of security coverage for the \nacquisition finance. \n170K. A corporate guarantee from the acquiring company shall be mandatory in cases \nof acquisition finance extended to a subsidiary or an SPV of the acquiring \ncompany. \n170L. Post-acquisition, Debt to Equity ratio at the acquiring company’s consolidated \nbalance sheet level shall not exceed 3:1 on a continuous basis. \n(3) Control acquisition requirements \n170M. The instruments through which such control is sought to be achieved may \ninclude equity shares, compulsorily convertible preference shares and \ncompulsorily convertible debentures conferring control over the target company. \nProvided that, all debt claims of the acquiring company or its group entities on the \ntarget company shall rank subordinate to the claims of the bank(s) extending \nacquisition finance, for the full tenor of the credit facility. \n170N. Control may be established through a single transaction, or a series of inter-\nconnected transactions but completed within 12 months from the date of first \ndisbursal of the acquisition finance. |
| textProvided that, where the acquiring company already holds control over the target \ncompany prior to seeking acquisition finance, acquisition finance may be extended \nonly for acquiring additional stake that crosses a substantial threshold of 26 per \ncent, 51 per cent, 75 per cent, 90 per cent of voting rights, each conferring \nmaterially enhanced governance or control rights under applicable law. \n(4) Related Party Restrictions: \n170O. The acquiring company and the target company shall not be related parties, \nwhere \ means: \n(i) Entities having a relationship as defined under Section 2(76) of the \nCompanies Act, 2013; or \n(ii) Entities under common control, common management, or common \npromoter group, whether directly or indirectly. \nProvided that, the above restrictions shall not apply for financing acquisition of \nadditional stake as prescribed under proviso to 170N above. \nG. Security Creation and Valuation \n170P. A bank may determine the extent and nature of security cover for acquisition \nfinance. \nProvided that, acquisition finance shall be secured by the financial instruments \nissued by the target company through which control over it is acquired by the \nacquiring company, without prejudice to the provisions of Section 19(2) of the BR \nAct 1949. \nProvided further that, other unencumbered assets of the acquirer and/or target \ncompany, and promoter’s personal guarantee may be taken as additional collateral \nas per the bank’s policy. \n170Q. Instruments acquired by the acquiring company as allowed in Paragraph 170M \nshall be free from any encumbrance. \nH. Other Conditions \n170R. Acquisition finance undertaken by overseas branches of an Indian bank as part \nof syndication arrangements, shall not be subject to the Directions given in this \nchapter provided that, the funding contribution of a bank under such a syndication |
| textarrangement for a particular deal, across all its overseas branches, shall not \nexceed 20 per cent of total funding under the deal. \n170S. Banks shall fix limits for their aggregate exposures towards acquisition finance \nwithin the regulatory limit as specified in Chapter V of the Reserve Bank of India \n(Commercial Banks – Concentration Risk Management) Directions, 2025.” \n] |
| textChapter XII - Credit Facilities to Overseas Joint Ventures (JV) / Wholly Owned \nSubsidiaries Abroad and overseas Step-down Subsidiaries of Indian \nCompanies \n171. The bank may extend fund-based facilities to Indian Joint Ventures / Wholly–\nowned Subsidiaries abroad and Step-down subsidiaries which are wholly owned \nby overseas subsidiaries of Indian Corporates. The bank may also provide buyer’s \ncredit / acceptance finance to overseas parties for facilitating export of goods and \nservices from India. While extending such facilities banks should comply with the \nfollowing conditions: \n(1) Fund-based credit facilities shall be granted only to those joint ventures where \nthe holding by the Indian company is more than 51 per cent. \n(2) Proper systems for management of credit and interest rate risks arising out of \nsuch cross- border lending are in place. \n(3) While extending such facilities, banks shall have to comply with Section 25 of \nthe Banking Regulation Act, 1949, in terms of which the assets in India of every \nquarter shall not be less than 75 per cent of its demand and time liabilities in \nIndia. \n(4) The resource base for such lending should be funds held in foreign currency \naccounts such as FCNR(B), EEFC, RFC, etc. in respect of which banks have \nto manage exchange risk. \n(5) Maturity mismatches arising out of such transactions are within the overall gap \nlimits approved by the Reserve Bank. \n(6) Adherence to all existing safeguards / prudential guidelines relating to capital \nadequacy, exposure norms etc. applicable to domestic credit / non- credit \nexposures. \n(7) The above exposure shall be subject to a limit of 20 per cent of banks' \nunimpaired capital funds (Tier I and Tier II capital). \n172. While extending fund-based facilities to step-down subsidiaries of overseas \nsubsidiaries of Indian Corporates, including to those beyond the first level, to \nfinance the projects undertaken abroad, it shall further be ensured that: \n(1) The immediate overseas subsidiary of the Indian company shall be directly \ncontrolled by the Indian parent company through any of the modes of control"} |
| {"text": "recognised under the Indian Accounting Standards. In addition, the Indian \nparent company must directly hold a minimum 51 per cent of its shareholding. \nExplanation: As per the Indian Accounting Standards, control has been defined \nas (a) the ownership, directly or indirectly, through subsidiary(ies), of more than \none-half of the voting power of an enterprise; or (b) control of the composition \nof the board of directors in the case of a company or of the composition of the \ncorresponding governing body in case of any other enterprise so as to obtain \neconomic benefits from its activities \n(2) All the step-down subsidiaries, including the intermediate ones, shall be wholly \nowned subsidiary of the immediate parent company or its entire shares shall \nbe jointly held by the immediate parent company and the Indian parent \ncompany and / or its wholly owned subsidiary. The immediate parent should, \nwholly or jointly with Indian parent company and / or its wholly owned \nsubsidiary, have control over the step-down subsidiary. \n(3) In addition to the stipulations above, for issuance of extension of any fund \nbased facilities to step-down subsidiaries of overseas subsidiaries of Indian \nCorporates, including to those beyond the first level, to finance the projects \nundertaken abroad, the banks shall further ensure that: \n(i) The setup of the step-down subsidiary shall be such that bank can \neffectively monitor the facilities granted by it. \n(ii) The bank shall make additional provision of two per cent (in addition to \ncountry risk provision that is applicable to all overseas exposures) against \nstandard assets representing all exposures to the step-down subsidiaries, \nto cover the additional risk arising from complexity in the structure, location \nof different intermediary entities in different jurisdictions exposing the \nIndian company, and hence the bank, to greater political and regulatory \nrisk. \n173. Further, the loan policy for such fund-based facility shall be, inter-alia, in \nkeeping with the following: \n(1) Grant of such loans is based on proper appraisal and commercial viability of \nthe projects and not merely on the reputation of the promoters backing the \nproject. Non-fund based facilities shall be subjected to the same rigorous \nscrutiny as fund-based limits."} |
| {"text": "(2) The countries where the joint ventures / wholly owned subsidiaries are located \nshall have no restrictions applicable to these companies in regard to obtaining \nforeign currency loans or for repatriation etc. and shall permit non-resident \nbanks to have legal charge on securities / assets abroad and the right disposal \nin case of need. \n174. The bank shall be guided by the Master Direction - External Commercial \nBorrowings, Trade Credits and Structured Obligations, for raising loans through \nECB towards repayment of rupee loans availed of from domestic banking system. \n175. For extension of non-fund based facilities, the bank shall be guided by Chapter \nXVI of these Directions."} |
| {"text": "Chapter XIII - Loans Against Financial Assets \nA. 25[***** \n176. ***** \n177. ***** \n178. ***** \n179. ***** \nB. ***** \n180. ***** \n181. ***** \n182. ***** \n183. ***** \n184. ***** \n185. ***** \n186. ***** \nC. ***** \n187. ***** \n188. ***** \nD. ***** \n189. ***** \nE. ***** \n190. ***** \n191. ***** \n \n25 Deleted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026"} |
| {"text": "F. ***** \n192. ***** \n193. ***** \nG. ***** \n194. ***** \n195. ***** \nH. ***** \n196. ***** \nI. \n***** \n197. ***** \nJ. ***** \n198. ***** \n199. ***** \nK. ***** \n200. ***** \nL. ***** \n201. ***** \n202. ***** \n203. ***** \n204. ***** \n205. ***** \n206. ***** \n207. ***** \n208. ***** \n209. ***** \n210. *****"} |
| {"text": "211. ***** \n212. ***** \n213. ***** \n214. *****] \nM. Advances against Fixed Deposit Receipts (FDRs) \n215. The bank shall desist from sanctioning advances against FDRs or other term \ndeposits of other banks. \n216. Grant of advance against NR(E) and FCNR(B) deposits shall be subject to the \nguidelines issued under Foreign Exchange Management Act, 1999. \nN. 26[***** \n217. *****] \nO. Grant of Loans for acquisition of / investing in Small Saving Instruments \n218. The grant of loans for acquiring / investing in small saving schemes does not \npromote fresh savings and, rather, channelises the existing savings in the form of \nbank deposits to small savings instruments and thereby defeats the very purpose \nof such schemes. The bank shall, therefore, ensure that no loans are sanctioned \nfor acquisition of / investing in Small Savings Instruments including Kisan Vikas \nPatras. \nP. 27[***** \n219. *****] \n28[ \nQ. Loans against Eligible Securities \nQ.1 \nGeneral Conditions \n \n26 Deleted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 \n27 Deleted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026 \n28 Inserted with effect from July 01, 2026 vide Reserve Bank of India (Commercial Banks – Credit Facilities) \nAmendment Directions, 2026 (Revised) dated March 30, 2026"} |
| {"text": "219A. Banks may extend credit facilities against the collateral of eligible securities, as \npermitted in this chapter, as per their approved policy (hereinafter called the policy). \nThe policy shall, at the minimum, specify the criteria for selecting securities as \ncollateral; determining portfolio-level as well as single borrower/group borrower \nlimits; concentration limits for exposure to single securities; LTV/margins and \nhaircuts for different securities; and rules for ongoing valuation and margin calls. \n219B. Notwithstanding the above, following loans by a bank shall not be permitted: \n(1) Loans against its own securities; \nProvided that, a bank may extend loans to individuals against Long-Term \nBonds issued by it for infrastructure financing under the provisions of the \nReserve Bank of India (Commercial Banks – Resource Raising Norms) \nDirections, 2025. The Board of the bank shall frame a policy in this regard, \nprescribing suitable margins, purpose of the loan, and other necessary \nsafeguards. Such loans shall be subject to a ceiling, say, ₹10 lakh per \nborrower; and tenure of the loan shall not exceed the maturity period of the \nunderlying bonds. It is also clarified that a bank shall not extend loans \nagainst such bonds issued by other banks. \nProvided further that, a bank may lend against CDs and buy back their own \nCDs where such CDs are held by mutual funds, subject to the provisions of \nparagraph 42 (1) of the SEBI (Mutual Funds) Regulations, 2026. Further, \nsuch finance if extended to equity-oriented mutual funds shall form part of \nbanks’ capital market exposure, as hitherto. \n(2) loans against partly paid shares; \n(3) loans against securities which are under any lock-in requirements; \n(4) loans against collateral of Indian Depository Receipts (IDRs); \n(5) loans against securities of such entities to which banks are not allowed to \ngrant loans and advances; \n(6) loans to companies for buy-back of shares/ securities as specified in \nparagraph 23 of Reserve Bank of India (Commercial Banks – Credit Risk \nManagement) Directions, 2025; \n(7) loans against Commercial Papers and Non-Convertible Debentures of \noriginal or initial maturity upto one year;"} |
| {"text": "219C. While undertaking lending activities under the provisions of this chapter, a bank \nshall: \n(1) put in place robust mechanisms to monitor end use of the funds. \n(2) stipulate suitable risk limits taking into account inter alia the liquidity, \nvolatility, and potential stress period corrections in the price of securities. \n(3) ensure that the residual maturity of the securities initially taken as collateral, \nor subsequently substituted for the original collateral securities, is equal to \nor longer than the tenor of the loan. \nExplanation: Condition of residual maturity is applicable in cases of non-\nperpetual securities. \n(4) ensure that provision of Section 19(2) of Banking Regulation Act, 1949 on \nholding of shares are adhered to. \n(5) ensure that the prudential limits prescribed under these Directions are \nadhered to even when loans are extended to any of the joint holders of \nsecurities by treating the joint holders as availing proportionate amount of \nloan sanctioned to them jointly. \n(6) undertake the creation and invocation of pledge/hypothecation/lien against \nGovernment securities in terms of Section 28 of the Government Securities \nAct, 2006, Chapter VII of Government Securities Regulations, 2007; any \nother specific requirements as issued by the Government for such \nsecurities; and relevant guidelines issued by the Reserve Bank from time to \ntime. \n(7) ensure that loans taken against Sovereign Gold Bond (SGB) are in terms of \nthe instructions specified in SGB notification issued by Government of India \nand the operational instructions relating to creation and invocation of \npledge/hypothecation/lien as per paragraph 11 of circular on ‘Sovereign \nGold Bond Scheme of the Government of India (GoI) – Procedural \nGuidelines – Consolidated’ dated October 22, 2021, as amended from time \nto time. \n219D. All exposures arising out of loans against eligible securities under this Chapter \nshall be included as CME, as specified in Reserve Bank of India (Commercial \nBanks - Concentration Risk Management) Directions, 2025, except wherever \nspecifically exempted."} |
| {"text": "Q.2 \nLending to Individuals \nQ.2.1 Scope \n219E. Loans to individuals, including Hindu Undivided Families (HUFs) which are not \ncommercial entities, shall be covered under this section. \n219F. Banks may lend to individuals against eligible securities, subject to the LTVs \nand prudential ceilings specified hereunder. \nQ.2.2 LTV Requirements \n219G. Banks shall lay down the LTV for loans against eligible securities to individuals \nas per their credit policy, subject to the following ceilings: \nEligible Securities \nLTV Ceiling \nGovernment Securities (including T-Bills) \nAs per bank’s policy \nSovereign Gold Bonds (SGBs) \nAs applicable in case \nof loans against Gold \nand Silver Collateral \nListed shares and listed convertible debt \nsecurities \n60 per cent \nMutual Funds (excluding Debt MFs), Units of ETF \nand Units of REITs/InvITs \n75 per cent \nDebt Mutual Funds \n85 per cent \nListed Debt Securities with rating: \n AAA \nAA – BBB \n \n85 per cent \n75 per cent \n219H. LTV shall be monitored on an ongoing basis and a bank shall take steps to \nrectify the breaches immediately, but in no case later than seven working days from \nthe day of occurrence of such a breach. \n219I. Valuation of securities taken as collateral, for the purpose of LTV shall be as \nper the following norms: \n(1) Valuation of debt securities shall be in terms of Reserve Bank of India \n(Commercial Banks – Classification, Valuation, and Operation of Investment \nPortfolio) Directions, 2025, as updated from time to time. \n(2) Listed shares and units of mutual funds/ETFs/REIT/InvITs shall be valued \nat lower of the average daily closing prices/NAVs for the last six months or \nthe closing price/NAV of the previous trading day."} |
| {"text": "Q.2.3 Prudential Ceilings \n219J. Banks may fix their own prudential limits in terms of their approved policy for \nloans to individuals against collateral of Government securities (including T-Bills), \nlisted debt securities and units of debt mutual fund schemes. \nProvided that, during the tenor of the loan, if the credit rating of the particular \ndebt security is downgraded below BBB(-), banks shall ensure that those \nsecurities are replaced with any other eligible security within a period of thirty \nworking days, or proportionate portion of the exposure is repaid. \n219K. The amount of loan from the banking system that can be granted to individuals \nagainst eligible securities, other than those mentioned in paragraph 219J above, \nshall be capped at ₹1 crore per individual. \n219L. Within the above limits as prescribed in paragraphs 219J and 219K above, loan \nup to ₹25 lakh per individual may be granted for the purpose of acquisition of \nsecurities in secondary markets. \nQ.2.4 IPO/FPO/ESOP Financing \n219M. Banks may grant loans to individuals after ensuring due diligence for \nsubscribing to shares under initial public offer (IPO), follow-on public offer (FPO), \nor under employee stock option plan (ESOP) upto ₹25 lakh per individual at the \nbanking system level. \nProvided that the loan amount shall not exceed 75 per cent of the subscription \nvalue, i.e., borrowers shall contribute a minimum cash margin of 25 per cent. \nProvided further that no loan, whether secured or unsecured, shall be granted \nby a bank to its own employees or Employees’ Trust set up by the bank for \npurchasing its own Securities under IPOs/FPOs/ESOPs or from the secondary \nmarket. \n219N. It shall be ensured that a lien is created on the shares to be allotted under the \nIPOs/FPOs/ESOPs, and such shares shall be pledged to the lender upon \nallotment. \nQ.3 \nLending to non-individuals (other than CMIs) \nQ.3.1 Loans for General Business Purposes"} |
| {"text": "219O. A bank may provide finance, as per its approved policy, to non-financial entities \nagainst eligible securities, in addition to other collateral, for financing their working \ncapital or for other productive purposes. \nQ.3.2 Bridge Finance for Financing Promoter’s stake in New Companies \n219P. Banks may put in a Board approved policy, to provide bridge finance to non-\nfinancial corporates against the collateral of eligible securities held by them or \nimmovable properties for financing promoters’ stake for setting up new companies. \n219Q. Such lending under paragraph 219O and 219P against eligible securities shall \nbe subject to the LTV ceiling as specified in paragraph 219G of these Directions. \nBanks shall ensure the end use of funds in all such cases is not used for \nspeculative purposes. \nQ.3.3 Issue of Irrevocable Payment Commitments \n219R. A custodian bank may issue Irrevocable Payment Commitments (IPCs) on \nbehalf of their clients, in favour of a Clearing Corporation of a Stock Exchange, \nsubject to meeting any one of the following conditions: \n(1) The IPC issuer bank has an agreement with its client which allows the bank \nan inalienable right over the securities to be received as pay out in any \nsettlement; or, \n(2) Such transactions are fully pre-funded i.e., either clear INR funds are \navailable in the customer’s account or, in case of FX deals involving FPIs, \nthe bank’s nostro account has been credited before the issuance of the IPC."} |
| {"text": "Chapter XIII A – Credit Facilities to Capital Market Intermediaries (CMIs) \nA. Scope \n219S. Provisions of this Chapter are applicable to lending to CMIs, as defined under \nthese Directions. \nB. General Conditions \n219T. Credit facilities may be extended only to CMIs which are registered and \nregulated by a financial sector regulator and are in compliance with the prudential \nnorms prescribed by such regulator. \n219U. All exposures to CMIs shall be included as CME, except wherever specifically \nexempted. \n219V. Banks shall put in place counterparty as well as aggregate exposure limits for \nCMIs, within the overall prudential limits for CME, and relevant limits prescribed \nunder the Large Exposures Framework (LEF) and Intra-group transactions and \nexposures (ITE) in terms of Reserve Bank of India (Commercial Banks – \nConcentration Risk Management) Directions, 2025. \nC. Permissible and Prohibited Credit Facilities \n219W. A bank may provide need-based credit facilities to CMIs to fund their day-to-\nday operations, including general working capital facilities and specific facilities \nsuch as financing for margin trading undertaken by stockbrokers; overdraft/credit \nline facility to stockbrokers/commodity brokers/clearing members to meet \nsettlement related timing mismatches; and market making (for equity as well as \ndebt securities, including State and Central Government securities). \n219X. A bank may also issue guarantees on behalf of brokers or professional clearing \nmembers and in favour of exchanges or clearing houses, as applicable, in lieu of: \n(1) security deposit to the extent it is acceptable in the form of bank guarantee \nas laid down by stock exchanges; \n(2) margin requirements as per exchange regulations. \n219Y. Such guarantees shall be secured by a minimum collateral of 50 per cent, out \nof which 25 percent shall be in cash."} |
| {"text": "219Z. Banks shall not provide credit facilities to a CMI for acquisition of securities on \nits own account, including for proprietary trading or investments. \nProvided that: \n(1) a bank may extend finance to approved market makers in equity and debt \nsecurities on a fully secured basis. \n(2) a bank may provide working capital finance to a CMI for warehousing of \ndebt securities, including Government Securities, upto a maximum period \nof 45 days for fulfilling firm demand/request from its clients. Such financing \nshould be on fully secured basis with appropriate haircut on securities \npledged. \n(3) a bank may extend other working capital facilities against a 100 per cent \ncollateral of cash, cash equivalents and Government Securities (including \nT-Bills). \n219ZA. A bank may extend guarantees in terms of paragraph 219X for proprietary \ntrading by CMIs subject to the facility being fully secured by collateral of cash, cash \nequivalents and Government Securities (including T-Bills), out of which a minimum \n50 per cent shall be cash or fixed deposits maintained with the lending bank. Banks \nshould ensure through a proper mechanism that guarantees issued for non-\nproprietary purposes are not used to facilitate proprietary trading. \nD. \nSecurity Coverage \n219ZB. Without prejudice to paragraphs 219Z and 219ZA, all credit facilities to CMIs, \nincluding intraday facilities, unless otherwise stated, shall be provided on a fully \nsecured basis (i.e. 100 per cent collateral). Credit facilities to CMIs can be secured \nby eligible securities as defined in these Directions or other collaterals such as \ncash, other permissible financial assets (except Commercial Paper and Non-\nConvertible Debentures of original or initial maturity up to one year), immovable \nproperties, receivables, bank guarantees and standby letter of credit (SBLC). \nExplanation: Receivables in this context shall also include proceeds of cash \nand securities arising on account of a capital market transaction other than \nmargin trading facility (MTF) transactions. \nProvided that:"} |
| {"text": "(1) In case of intra-day limits extended to CMIs, a relaxed minimum collateral \nrequirement of 50 per cent shall apply in case the intra-day limit is utilised \nfor meeting shortfall arising on account of settlement timing difference in \ncentrally cleared trades placed on behalf of clients, provided the CMI has \nexpected receivables from a QCCP fully covering such intra-day \ndrawdowns. \n(2) In respect of financing to brokers for margin trading facility (MTF) provided \nby them to their clients in terms of SEBI Regulations, the facility shall be fully \nsecured by collateral of cash, cash equivalents and Government Securities \n(including T-Bills) out of which a minimum 50 per cent shall be cash. \n(3) A bank shall apply suitable haircuts to various types of primary securities \nand collateral securities, including eligible securities, subject to a minimum \nhaircut of 40 per cent in case of equity shares. \n219ZC. In terms of para 414 of ‘Chapter XVI - Non-Fund Based (NFB) Credit Facilities’ \nof these Directions, banks cannot issue guarantee favouring another RE to enable \nit to provide any fund-based credit facility to an obligor. Notwithstanding this \nprovision, counter-guarantees issued by other Indian banks and SBLCs issued by \nforeign banks of repute, including foreign parent bank of a CMI, may also be \nconsidered as eligible non-cash collateral wherever allowed for the purpose of this \nChapter. Provided that this shall be without prejudice to the extant FEMA \nregulations. \n219ZD. The collateral cover, as applicable, shall be maintained on an ongoing basis \nand the facility agreements shall have explicit provisions for margin calls in the \nevent of shortfalls. \n219ZE. A bank shall ensure that the collaterals placed for such financing generally \nbelong to the borrower CMI. Collateral belonging to a group entity/promoter of the \nCMI may also be accepted, provided it is unencumbered, exclusively charged for \nthis facility and legally enforceable. \n]"} |
| {"text": "Chapter XIV - Finance to Non-Banking Financial Companies (NBFCs) \nBackground: Consistent with the policy of bestowing greater operational freedom to \nbanks in the matter of credit dispensation and in the context of mandatory registration \nof NBFCs with the Reserve Bank, most of the aspects relating to financing of NBFCs \nby banks have also been deregulated. However, in view of the sensitivities attached \nto financing of certain types of activities undertaken by NBFCs, restrictions on \nfinancing of such activities continue to be in force. In this context, NBFCs mean the \nNon-Banking Financial Companies registered with the Reserve Bank of India, which \nshall also include a Housing Finance Company (HFC) registered under Section 29A \nof the National Housing Bank Act, 1987. \nA. Finance to NBFCs registered with RBI \n220. The ceiling on bank credit linked to Net Owned Fund (NOF) of NBFCs has been \nwithdrawn in respect of all NBFCs which are statutorily registered with the Reserve \nBank and are engaged in principal business of asset financing, loan, factoring and \ninvestment activities. Accordingly, the bank shall extend need based working \ncapital facilities as well as term loans to all NBFCs registered with the Reserve \nBank and engaged in infrastructure financing, equipment leasing, hire-purchase, \nloan, factoring and investment activities subject to provisions of paragraph 232 of \nthese Directions. \n221. In the light of the experience gained by NBFCs in financing second hand assets, \nthe bank shall also extend finance to NBFCs against second hand assets financed \nby them. \n222. The bank shall formulate suitable loan policy with the approval of their Boards \nof Directors within the prudential guidelines and exposure norms prescribed by the \nReserve Bank to extend various kinds of credit facilities to NBFCs subject to the \ncondition that the activities indicated in paragraphs 224, 225, 228, 229 and 230 \nare not financed by them. \nB. Finance to NBFCs not requiring Registration \n223. In terms of Reserve Bank of India (Non-Banking Financial Companies – \nRegistration, Exemptions and Framework for Scale Based Regulation) Directions, \n2025, a few categories of NBFCs are exempted from certain provisions of the"} |
| {"text": "Reserve Bank of India Act, 1934, including the need for registration with the \nReserve Bank. For such NBFCs which do not need registration with the Reserve \nBank, the bank shall take its credit decisions on the basis of usual factors like the \npurpose of credit, nature and quality of underlying assets, repayment capacity of \nborrowers as also risk perception, etc. Further, while financing NBFCs, which do \nnot require registration with RBI, banks shall also refer to the guidelines / \nnotifications issued in this regard from time to time by the Ministry of Corporate \nAffairs, Government of India. \nC. Activities not eligible for Bank Credit \n224. The following activities undertaken by NBFCs, are not eligible for bank credit: \n(1) Bills discounted / rediscounted by NBFCs, except for rediscounting of bills \ndiscounted by NBFCs arising from sale of - \n(i) commercial vehicles (including light commercial vehicles), and \n(ii) two-wheeler and three-wheeler vehicles, subject to the following conditions: \n(a) the bills shall be drawn by the manufacturer on dealers only; \n(b) the bills shall represent genuine sale transactions as may be \nascertained from the chassis / engine number; and \n(c) before rediscounting the bills, the bank shall satisfy themselves about \nthe bona fides and track record of NBFCs which have discounted the \nbills. \n(2) Investments of NBFCs both of current and long-term nature, in any company / \nentity by way of shares, debentures, etc. However, Stock Broking Companies \nshall be provided need-based credit against shares and debentures held by \nthem as stock-in- trade. \nIn this context, current investments mean the investments classified in the \nbalance sheet of the borrower as 'current assets' and are intended to be held \nfor less than one year and long term investments mean all types of investments \nother than that classified as 'current assets'. \n(3) Unsecured loans / inter-corporate deposits by NBFCs to / in any company. \nIn this context, unsecured loans mean the loans not secured by any tangible \nasset."} |
| {"text": "(4) All types of loans and advances by NBFCs to their subsidiaries, group \ncompanies / entities. \n(5) Finance to NBFCs for further lending to individuals for subscribing to Initial \nPublic Offerings (IPOs) and for purchase of shares from secondary market. \n225. Leased and Sub-Leased Assets \nAs banks can extend financial assistance to equipment leasing companies, they shall \nnot enter into lease agreements departmentally with such companies as well as other \nNBFCs engaged in equipment leasing. \nD. Finance to Factoring Companies \n226. Notwithstanding the restrictions mentioned at paragraph 224, the bank may \nextend financial assistance to support the factoring business of Factoring \nCompanies, viz., ‘NBFC-Factors’ and ‘NBFC-ICCs holding certificate of \nregistration under the Factoring Regulation Act, 2011’, subject to the following \nconditions: \n(1) The companies qualify as factoring companies; and carry out their business \nunder the provisions of the Factoring Regulation Act, 2011 and Notifications \nissued by the Reserve Bank in this regard from time to time. \n(2) The financial assistance extended by the Factoring Companies is secured by \nhypothecation or assignment of receivables in their favour. \n227. In addition to the above, NBFC-Factors must also satisfy the following criteria \nto be eligible for bank finance - \n(1) They derive at least 50 per cent of their income from factoring activity. \n(2) The receivables purchased / financed, irrespective of whether on 'with \nrecourse' or 'without recourse' basis, form at least 50 per cent of their assets. \n(3) The assets / income referred to at (1) and (2) above shall not include the assets \n/ income relating to any bill discounting facility extended by them. \nE. Other Prohibitions on Finance to NBFCs \n228. Bridge loans / interim finance \nThe bank shall not grant bridge loans of any nature, or interim finance against \ncapital / debenture issues and / or in the form of loans of a bridging nature pending \nraising of long-term funds from the market by way of capital, deposits, etc. to all"} |
| {"text": "categories of NBFCs. The bank shall strictly follow these instructions and ensure \nthat they are not circumvented in any manner whatsoever by purport and / or intent \nby sanction of credit under a different nomenclature like unsecured negotiable \nnotes, floating rate interest bonds, etc., as also short-term loans, the repayment of \nwhich is proposed / expected to be made out of funds to be or likely to be mobilised \nfrom external / other sources and not out of the surplus generated by the use of \nthe asset(s). \n229. Advances against collateral security of shares to NBFCs \nShares and debentures shall not be accepted as collateral securities for secured \nloans granted to NBFC borrowers for any purpose. \n230. Restriction on guarantees for placement of funds with NBFCs \nThe bank shall comply with the provisions of Chapter XVI of these Directions \nregarding restrictions on issuing guarantees for placement of funds with NBFCs or \nother non-bank entities. \nF. Other Instructions \n231. For prudential ceilings for exposure to NBFCs, the bank shall be guided by the \ninstructions contained in the Reserve Bank of India (Commercial Banks – \nConcentration Risk Management) Directions, 2025. \n232. For restrictions regarding investments made by the bank in securities / \ninstruments issued by NBFCs, it shall be guided by the instructions contained in \nthe Reserve Bank of India (Commercial Banks – Classification, Valuation and \nOperation of Investment Portfolio) Directions, 2025. \n233. For risk weights for bank credit to NBFCs, the bank’s exposure to NBFCs shall \nbe subject to capital charge as per the Risk Weight prescribed in Reserve Bank of \nIndia (Commercial Banks – Prudential Norms on Capital Adequacy) Directions, \n2025."} |
| {"text": "Chapter XV - Export Credit \nBackground: The Reserve Bank first introduced the scheme of Export Financing in \n1967. The scheme is intended to make short-term working capital finance available \nto exporters at internationally comparable interest rates. Export credit is available \nboth in Rupee as well as in foreign currency. \nA. Rupee Pre-shipment Credit / Packing Credit \nA.1 \nPeriod of Advance \n234. The period of a packing credit advance shall be determined by the bank based \non the specific circumstances of each case, including the time required for \nprocuring, manufacturing or processing (as applicable) and shipping the relative \ngoods / rendering of services. The banks shall ensure that the sanctioned period \nis sufficient to enable the exporter to ship the goods / render the services within a \nreasonable timeframe. \n235. If pre-shipment advances are not adjusted by submission of export documents \nwithin 360 days from the date of advance, the advances shall cease to qualify for \nexport credit to the exporter ab initio. \nA.2 \nDisbursement of Packing Credit \n236. Generally, each packing credit sanctioned shall be maintained as separate \naccount for the purpose of monitoring the period of sanction and end-use of funds. \n237. The bank shall release the packing credit in one lump sum or in stages as per \nthe requirement for executing the orders / LC. \n238. The bank shall maintain separate accounts for different stages of processing, \nmanufacturing etc., depending on the types of goods / services to be exported \n(e.g., hypothecation, pledge). The bank shall ensure that the outstanding balance \nin accounts are adjusted by transfer from one account to the other and finally by \nproceeds of relative export documents on purchase, discount, etc. \n239. The bank shall also monitor the progress made by the exporters in timely \nfulfilment of export orders."} |
| {"text": "A.3 \nLiquidation of Packing Credit \n240. The packing credit / pre-shipment credit granted to an exporter shall be \nliquidated out of proceeds of bills drawn for the exported commodities on its \npurchase, discount etc., thereby converting pre-shipment credit into post-shipment \ncredit. Further, subject to mutual agreement between the exporter and the banker \nit can also be repaid / prepaid out of balances in Exchange Earners Foreign \nCurrency A/c (EEFC A/c) as also from Rupee resources of the exporter to the \nextent exports have actually taken place. \n241. Packing credit in excess of export value \n(1) Where by-product can be exported \n(2) Where the exporter is unable to tender export bills of equivalent value for \nliquidating the packing credit due to the shortfall on account of wastage \ninvolved in the processing of agro products like raw cashew nuts, etc., the bank \nshall allow exporters, inter alia, to extinguish the excess packing credit by \nexport bills drawn in respect of by-product like cashew shell oil, etc. \n(3) Where partial domestic sale is involved \n(4) In respect of export of agro-based products like tobacco, pepper, cardamom, \ncashew nuts etc., the exporter has to necessarily purchase a somewhat larger \nquantity of the raw agricultural produce and grade it into exportable and non- \nexportable varieties and only the former is exported. The non-exportable \nbalance is necessarily sold domestically. For the packing credit covering such \nnon-exportable portion, the bank shall charge the rate of interest applicable to \nthe domestic advance from the date of advance of packing credit. \n(5) Export of deoiled / defatted cakes \n(6) The bank shall grant packing credit advance to exporters of HPS groundnut \nand deoiled / defatted cakes to the extent of the value of raw materials required \neven though the value thereof exceeds the value of the export order. The \nadvance in excess of the export order shall be adjusted either in cash or by \nsale of residual by-product oil within a period not exceeding 30 days from the \ndate of advance. \n242. The bank shall, however, have operational flexibility to extend the following \nrelaxations to their exporter clients who have a good track record:"} |
| {"text": "(1) Repayment / liquidation of packing credit with proceeds of export documents \nshall; continue; however, this shall be with export documents relating to any \nother order covering the same or any other commodity exported by the \nexporter. While allowing substitution of contract in this way, the bank shall \nensure that it is commercially necessary and unavoidable. The bank shall also \nsatisfy itself about the valid reasons as to why packing credit extended for \nshipment of a particular commodity cannot be liquidated in the normal method. \nAs far as possible, the substitution of contract shall be allowed if the exporter \nmaintains account with the same bank or it has the approval of the members \nof the consortium, if any. \n(2) The existing packing credit shall also be marked-off with proceeds of export \ndocuments against which no packing credit has been drawn by the exporter. \nHowever, it is possible that the exporter might avail of EPC with one bank and \nsubmit the documents to another bank. In view of this possibility, the bank shall \nextend such facility after ensuring that the exporter has not availed of packing \ncredit from another bank against the documents submitted. If any packing \ncredit has been availed of from another bank, the bank to which the documents \nare submitted shall ensure that the proceeds are used to liquidate the packing \ncredit obtained from the first bank. \n(3) These relaxations shall not be extended to transactions of sister / associate / \ngroup concerns. \nA.4 \n'Running Account' Facility \n243. The pre-shipment credit to exporters is normally provided on lodgement of LCs \nor firm export orders. However, due to certain reasons such as (i) seasonal \navailability of raw materials, and (ii) time required for manufacture and shipment of \ngoods exceeding the delivery schedule under export contracts, the exporters may \nneed to procure raw material, manufacture goods, and keep them ready for \nshipment in anticipation of receipt of letters of credit / firm export orders from the \noverseas buyers. In view of the foregoing, a bank may extend Pre-shipment Credit \n‘Running Account’ facility in respect of any commodity, without insisting on prior \nlodgement of letters of credit / firm export orders, depending on its judgement \nregarding the need to extend such a facility and subject to the following conditions:"} |
| {"text": "(1) ‘Running Account’ facility can be extended only to those exporters whose track \nrecord has been good as also to Export Oriented Units (EOUs) / Units in Free \nTrade Zones / Export Processing Zones (EPZs) and Special Economic Zones \n(SEZs). \n(2) In all cases where Pre-shipment Credit ‘Running Account’ facility has been \nextended, letters of credit / firm orders shall be produced within a reasonable \nperiod of time to be decided by the bank. \n(3) The bank shall mark off individual export bills, as and when they are received \nfor negotiation / collection, against the earliest outstanding pre-shipment credit \non 'First In First Out' (FIFO) basis. Needless to add that, while marking off the \npre-shipment credit in the manner indicated above, banks shall ensure that \nexport credit available in respect of individual pre-shipment credit does not go \nbeyond the period of sanction or 360 days from the date of advance, whichever \nis earlier. \n(4) Packing credit shall also be marked-off with proceeds of export documents \nagainst which no packing credit has been drawn by the exporter. \n244. If it is noticed that the exporter is found to be misusing the facility, the facility \nshall be withdrawn forthwith. \n245. In cases where exporters have not complied with the terms and conditions, the \nadvance shall not be treated as export credit ab initio. \n246. Running account facility shall not be granted to sub-suppliers. \nA.5 \nExport Credit against proceeds of cheques, drafts, etc. representing \nadvance payment for exports \n247. Where exporters receive direct remittances from abroad by means of cheques, \ndrafts etc. in payment for exports, the bank shall grant export credit to exporters of \ngood track record till the realisation of proceeds of the cheque, draft etc. received \nfrom abroad, after satisfying itself that it is against an export order, is as per trade \npractices in respect of the goods in question and is an approved method of \nrealisation of export proceeds as per extant rules."} |
| {"text": "B. Rupee Pre-shipment Credit to specific sectors / segments \nB.1 \nRupee Export Packing Credit to manufacturer suppliers for exports \nrouted through STC / MMTC / Other Export Houses, Agencies etc. \n248. The bank may grant export packing credit to manufacturer suppliers who do not \nhave export orders / letters of credit in their own name and goods are exported \nthrough the State Trading Corporation / Minerals and Metal Trading Corporation \nor other export houses, agencies etc. \nB.2 \nRupee Export Packing Credit to Sub-Suppliers \n249. Packing credit may be shared between an Export Order Holder (EOH) and sub-\nsupplier of raw materials, components etc. of the exported goods as in the case of \nEOH and manufacturer suppliers, subject to the following: \n(1) Running Account facility is not contemplated under the scheme. The scheme \nshall cover the LC or export order received in favour of Export Houses / Trading \nHouses / Star Trading Houses etc. or manufacturer exporters only. The \nscheme shall be made available to the exporters with good track record. \n(2) Banker to an EOH shall open an inland LC specifying the goods to be supplied \nby the sub-supplier to the EOH against the export order or LC received by it as \na part of the export transaction. On the basis of such a LC, the sub-supplier's \nbanker shall grant EPC as working capital to enable the sub-supplier to \nmanufacture the components required for the goods to be exported. On \nsupplying the goods, the LC opening bank shall pay to the sub-supplier's \nbanker against the inland documents received on the basis of inland LC. Such \npayments will thereafter become the EPC of the EOH. \n(3) It is up to the EOH to open any number of LCs for the various components \nrequired with the approval of his banker / leader of consortium of banks within \nthe overall value limit of the order or LC received by him. Taking into account \nthe operational convenience, it is for the LC opening bank to fix the minimum \namount for opening such LCs. The total period of packing credit availed by the \nsub-supplier(s), individually or severally and the EOH shall be within normal \ncycle of production required for the exported goods. Normally, the total period \nwill be computed from the date of first drawal of packing credit by any one of \nthe sub-suppliers to the date of submission of export documents by EOH."} |
| {"text": "(4) The EOH shall be responsible for exporting the goods as per export order or \noverseas LC and any delay in the process will subject it to the penal provisions \nissued from time to time. Once the sub-supplier makes available the goods as \nper inland LC terms to the EOH, its obligation of performance under the \nscheme shall be treated as complied with and the penal provisions shall not \nbe applicable to him for delay by EOH, if any. \n(5) The scheme is an additional window besides the existing system of sharing of \npacking credit between EOH and manufacturer in respect of exported goods \nas detailed in paragraph 248 above. The scheme shall cover only the first \nstage of production cycle. For example, a manufacturer exporter shall be \nallowed to open domestic LC in favour of his immediate suppliers of \ncomponents etc. that are required for manufacture of exportable goods. The \nscheme shall not be extended to cover suppliers of raw materials / components \netc. to such immediate suppliers. In case the EOH is merely a trading house, \nthe facility shall be available commencing from the manufacturer to whom the \norder has been passed on by the Trading House. \n(6) EOUs / EPZ / SEZ units supplying goods to another EOU / EPZ / SEZ unit for \nexport purposes are also eligible for rupee pre-shipment export credit under \nthis scheme. However, the supplier EOU / EPZ / SEZ unit shall not be eligible \nfor any post-shipment facility as the scheme does not cover sale of goods on \ncredit terms. \n(7) The scheme does not envisage any change in the total quantum of advance or \nperiod. Accordingly, the credit extended under the system shall be treated as \nexport credit from the date of advance to the sub-supplier to the date of \nliquidation by EOH under the inland export LC system and up to the date of \nliquidation of packing credit by shipment of goods by EOH. It shall be ensured \nthat no double financing of the same leg of the transaction is involved. \n(8) The bank shall approach the ECGC for availing suitable cover in respect of \nsuch advances. \n(9) The scheme does not envisage extending credit by a sub-supplier to the EOH \n/ manufacturer and thus, the payment to sub-suppliers shall be made against \nsubmission of documents by LC opening bank treating the payment as EPC of \nthe EOH."} |
| {"text": "B.3 \nRupee Pre-shipment Credit to Construction Contractors \n250. The packing credit advances to the construction contractors to meet their initial \nworking capital requirements for execution of contracts abroad shall be made on \nthe basis of a firm contract secured from abroad, in a separate account, on an \nundertaking obtained from them that the finance is required by them for incurring \npreliminary expenses in connection with the execution of the contract e.g., for \ntransporting the necessary technical staff and purchase of consumable articles for \nthe purpose of executing the contract abroad, etc. \n251. The advances shall be adjusted within 365 days from the date of advance by \nnegotiation of bills relating to the contract or by remittances received from abroad \nin respect of the contract executed abroad. \n252. The exporters undertaking project export contracts including export of services \nmay comply with the guidelines / instructions issued by Foreign Exchange \nDepartment of the Reserve Bank from time to time. \nB.4 \nExport of Services \n253. Pre-shipment and post-shipment finance shall be provided to exporters of all \nthe tradable services covered under the General Agreement on Trade in Services \n(GATS) and earning free foreign exchange as per the extant Foreign Trade Policy \nof Government of India. All provisions of this circular shall apply mutatis mutandis \nto export of services as they apply to export of goods unless otherwise specified. \n254. The financing bank shall ensure that there is no double financing and the export \ncredit is liquidated with remittances from abroad. The bank shall take into account \nthe track record of the exporter / overseas counter party while sanctioning the \nexport credit. \n255. The statement of export receivables from such service providers shall be tallied \nwith the statement of payables received from the overseas party. \n256. The bank shall formulate their own parameters to finance the service exporters. \n257. Exporters of services qualify for working capital export credit (pre and post \nshipment) for consumables, wages, supplies etc. The bank shall ensure the \nfollowing: \n(1) The proposal is a genuine case of export of services."} |
| {"text": "(2) The exporter is registered with the Electronic and software EPC or Services \nEPC or with Federation of Indian Export Organisations, as applicable. \n(3) There is an Export Contract for the export of the service. \n(4) There is a time lag between the outlay of working capital expense and actual \nreceipt of payment from the service consumer or his principal abroad. \n(5) There is a valid Working Capital gap i.e. service is provided first while the \npayment is received some time after an invoice is raised. \n(6) The bank shall ensure that there is no double financing / excess financing. \n(7) The export credit granted does not exceed the foreign exchange earned less \nthe margins if any required, advance payment / credit received. \n(8) Invoices are raised. \n(9) Inward remittance is received in Foreign Exchange. \n(10) Company shall raise the invoice as per the contract. Where payment is \nreceived from overseas party, the service exporter shall utilize the funds to \nrepay the export credit availed of from the bank. \nB.5 \nPre-shipment Credit to Floriculture, Grapes and Other Agro-based \nProducts \n258. Floriculture and other agro-based exports shall also qualify for export credit. \nHowever, the bank shall ensure that the activities are not covered by direct / \nindirect finance schemes of NABARD or any other agency. \n259. Export credit shall not be extended for investments, such as, import of foreign \ntechnology, equipment, land development etc. or any other item which cannot be \nregarded as working capital. \nB.6 \nExport Credit to Processors / Exporters - Agri-Export Zones \n260. Government of India has set up Agri-Export Zones in the country to promote \nAgri Exports. Agri- Export Oriented Units (processing) are set up in Agri- Export \nzones as well as outside the zones and to promote such units, production and \nprocessing are to be integrated. The producer has to enter into contract farming \nwith farmers and has to ensure supply of quality seeds, pesticides, micro-nutrients \nand other material to the group of farmers from whom the exporter shall be \npurchasing the products as raw material for production of the final products for \nexport. The Government, therefore, suggested that such export processing units"} |
| {"text": "may be provided packing credit under the extant guidelines for the purpose of \nprocuring and supplying inputs to the farmers so that quality inputs are available \nto them which in turn will ensure that only good quality crops are raised. The \nexporters will be able to purchase / import such inputs in bulk, which will have the \nadvantages of economies of scale. \n261. The bank shall treat the inputs supplied to farmers by exporters as raw material \nfor export and consider sanctioning the lines of credit / export credit to processors \n/ exporters to cover the cost of such inputs required by farmers to cultivate such \ncrops to promote export of agri products. The processor units shall be able to effect \nbulk purchases of the inputs and supply the same to the farmers as per a pre- \ndetermined arrangement. \n262. The bank shall ensure that the exporters have made the required arrangements \nwith the farmers and overseas buyers in respect of crops to be purchased and \nproducts to be exported respectively. The financing bank shall also appraise the \nprojects in agri export zones and ensure that the tie-up arrangements are feasible \nand projects would take off within a reasonable period of time. \n263. The bank shall also monitor the end-use of funds, viz. distribution of the inputs \nby the exporters to the farmers for raising the crops as per arrangements made by \nthe exporter / main processor units. \n264. The bank shall ensure that the final products are exported by the processors / \nexporters as per the terms and conditions of the sanction in order to liquidate the \npre-shipment credit as per extant instructions. \nC. Rupee Post-Shipment Export Credit \nC.1 \nPeriod of Realisation of Export Proceeds \n265. The period of realization of export proceeds is determined by Foreign Exchange \nDepartment of the Reserve Bank. The bank shall adhere to the direction issued \nunder Foreign Exchange Management Act, 1999, as amended from time to time. \nC.2 \nTypes of Post-shipment Credits \n266. Post-shipment advance shall mainly take the form of: \n(1) Export bills purchased / discounted / negotiated. \n(2) Advances against bills for collection."} |
| {"text": "(3) Advances against duty drawback receivable from Government. \nC.3 \nLiquidation of Post-shipment Credit \n267. Post-shipment credit is to be liquidated by the proceeds of export bills received \nfrom abroad in respect of goods exported / services rendered. Further, subject to \nmutual agreement between the exporter and the banker it can also be repaid / \nprepaid out of balances in Exchange Earners Foreign Currency Account (EEFC \nA/C) as also from proceeds of any other unfinanced (collection) bills. Such \nadjusted export bills shall however continue to be followed up for realization of the \nexport proceeds and shall continue to be reported in the Export Data Processing \nand Monitoring System (EDPMS). \n268. In order to reduce the cost to exporters (i.e. interest cost on overdue export \nbills), exporters with overdue export bills may extinguish their overdue post \nshipment rupee export credit from their rupee resources. However, the \ncorresponding Export Declaration Form will remain outstanding and the amount \nshall be shown outstanding in EDPMS. The exporter’s liability for realisation shall \ncontinue till the export bill is realised. \nC.4 \nPeriod of Rupee Post-Shipment Export Credit \n269. In the case of demand bills, the period of advance shall be the Normal Transit \nPeriod (NTP) as specified by FEDAI. \n270. In case of usance bills, credit shall be granted for a maximum duration of 365 \ndays from date of shipment inclusive of Normal Transit Period (NTP) and grace \nperiod, if any. However, the bank shall closely monitor the need for extending post-\nshipment credit up to the permissible period of 365 days and it shall persuade the \nexporters to realise the export proceeds within a shorter period. \nC.5 \nAdvances against Undrawn Balances on Export Bills \n271. In respect of export of certain commodities where exporters are required to \ndraw the bills on the overseas buyer up to 90 to 98 per cent of the FOB value of \nthe contract, the residuary amount being 'undrawn balance' is payable by the \noverseas buyer after satisfying himself about the quality / quantity of goods."} |
| {"text": "272. Payment of undrawn balance is contingent in nature. The bank shall consider \ngranting advances against undrawn balances based on their commercial \njudgement and the track record of the buyer. \nC.6 \nAdvances against Retention Money \n273. In the case of turnkey projects / construction contracts, progressive payments \nare made by the overseas employer in respect of services segment of the contract, \nretaining a small percentage of the progressive payments as retention money \nwhich is payable after expiry of the stipulated period from the date of the \ncompletion of the contract, subject to obtention of certificate(s) from the specified \nauthority. \n274. Retention money may also be stipulated against the supply portion of turn-key \nprojects or sub-contracts. The bank shall treat retention money as a deferred \nliability, given its contingent nature. \n275. Advances shall not be granted against retention money relating to services \nportion of the contract. \n276. Exporters shall be advised to arrange, as far as possible, provision of suitable \nguarantees, instead of retention money. \n277. The bank shall consider, on a selective basis, granting of advances against \nretention money relating to the supply portion of the contract taking into account, \namong others, the size of the retention money accumulated, its impact on the liquid \nfunds position of the exporter and the past performance regarding the timely \nreceipt of retention money. \n278. The payment of retention money shall be secured by LC or Bank Guarantee \nwhere possible. \n279. Where the retention money is payable after a period of one year from the date \nof shipment, according to the terms of the contract and the corresponding advance \nis extended for a period exceeding one year, it shall be treated as post-shipment \ncredit given on deferred payment terms exceeding one year, and the bank is free \nto decide the rate of interest."} |
| {"text": "C.7 \nExport on Consignment Basis \n280. Export on consignment basis lends scope for a lot of misuse in the matter of \nrepatriation of export proceeds. Therefore, export on consignment basis shall be \nat par with exports on outright sale basis on cash terms in matters regarding the \nrate of interest to be charged by banks on post-shipment credit. \n281. Export of precious and semi-precious stones \nPrecious and semi-precious stones, etc. are exported mostly on consignment \nbasis and the exporters are not in a position to liquidate pre-shipment credit \naccount with remittances received from abroad within a period of 365 days from \nthe date of advance. The bank shall, therefore, adjust packing credit advances in \nthe case of consignment exports, as soon as export takes place, by transfer of the \noutstanding balance to a special (post-shipment) account which in turn, shall be \nadjusted as soon as the relative proceeds are received from abroad but not later \nthan 365 days from the date of export or such extended period as may be permitted \nby Foreign Exchange Department of the Reserve Bank. \nC.8 \nExport of Goods for Exhibition and Sale \n282. The bank shall provide finance to exporters against goods sent for exhibition \nand sale abroad in the normal course in the first instance, and after the sale is \ncompleted, allow the benefit of rate of interest on such advances, if any, both at \nthe pre-shipment stage and at the post-shipment stage, up to the stipulated \nperiods, by way of a rebate. Such advances shall be given in separate accounts. \nC.9 \nPost-shipment Advances against Duty Drawback Entitlements \n283. The bank shall grant post-shipment advances to exporters against their duty \ndrawback entitlements and covered by ECGC guarantee as provisionally certified \nby Customs Authorities pending final sanction and payment. \n284. The advance against duty drawback receivables shall also be made available \nto exporters against export promotion copy of the shipping bill containing the EGM \nNumber issued by the Customs Department. Where necessary, the financing bank \nshall have its lien noted with the designated bank and arrangements shall be made \nwith the designated bank to transfer funds to the financing bank as and when duty \ndrawback is credited by the Customs."} |
| {"text": "C.10 ECGC Post-shipment Guarantee Scheme \n285. The bank shall, in the interest of export promotion and credit risk mitigation, \nconsider opting for export credit insurance products offered by ECGC Ltd. The \nsalient features of the scheme, Export Credit Insurance for Banks (ECIB), may be \nobtained directly from ECGC Ltd. \nAs the post-shipment guarantee mainly benefits the banks, the cost of premium \nmay be borne by the banks and not passed on to the exporters. \n286. However, even where the post-shipment credit is insured under an ECGC \npolicy, the bank shall not dilute their efforts towards realisation of their dues against \nlong outstanding export bills. \nC.11 Export Credit - DTA to SEZ Units \n287. As per the extant Foreign Trade Policy, goods and services going to Special \nEconomic Zone area (SEZ) from Domestic Tariff Area (DTA) shall be treated as \nexports. Accordingly, the supply of goods and services from DTA to Special \nEconomic Zone area would be eligible for export credit facilities. \nD. Deemed Exports - Rupee Export Credit \n288. The bank shall extend rupee pre-shipment and post-shipment export credit to \nparties against orders for supplies in respect of projects aided / financed by \nbilateral or multilateral agencies / funds (including World Bank, IBRD, IDA), as \nnotified from time to time by Department of Economic Affairs, Ministry of Finance \nunder the Section \"Deemed Exports\" in Foreign Trade Policy, which are eligible \nfor grant of normal export benefits by Government of India. \n289. Packing Credit provided shall be adjusted from free foreign exchange \nrepresenting payment for the suppliers of goods to these agencies. It shall also be \nrepaid / prepaid out of balances in Exchange Earners Foreign Currency account \n(EEFC A/c), as also from the rupee resources of the exporter to the extent supplies \nhave actually been made. \n290. The bank shall also extend rupee \n(1) pre-shipment credit, and \n(2) post-supply credit (for a maximum period of 30 days or up to the actual date of \npayment by the receiver of goods, whichever is earlier),"} |
| {"text": "for supply of goods specified as 'Deemed Exports' under the same Section of \nForeign Trade Policy from time to time. \nE. Interest on Rupee Export Credit \n291. The bank shall determine interest rate on rupee export credit (pre-shipment \ncredit and post-shipment credit) as per the policy approved by their Board, subject \nto the regulatory provisions contained in the Reserve Bank of India (Commercial \nBanks – Interest Rates on Advances) Directions, 2025. \n292. If pre-shipment advances are not liquidated from proceeds of bills on purchase, \ndiscount, etc. on submission of export documents within 360 days from the date \nof advance, or as indicated at paragraph 235 of these Directions, the advances \nshall not be treated as export credit ab initio. \n293. If exports do not materialise at all, the bank shall charge on relative packing \ncredit domestic lending rate plus penal charges, if any, to be decided by the bank \non the basis of a transparent policy approved by their Board. \nF. Pre-shipment Credit in Foreign Currency (PCFC) \nF.1 \nGeneral Provisions \n294. With a view to making credit available to exporters at internationally competitive \nrates, authorised dealers have been permitted to extend pre-shipment Credit in \nForeign Currency (PCFC) to exporters for domestic and imported inputs of \nexported goods at Alternative Reference Rate in the currency concerned. \n295. The scheme is an additional window for providing pre-shipment credit to Indian \nexporters at internationally competitive rates of interest. It shall be applicable to \nonly cash exports. The instructions with regard to Rupee Export Credit shall apply \nto export credit in Foreign Currency mutatis mutandis, unless otherwise specified. \n296. The exporter shall have the following options to avail of export finance: \n(1) to avail of pre-shipment credit in rupees and then the post-shipment credit \neither in rupees or discounting / rediscounting of export bills under EBR \nScheme mentioned in paragraph 340 to 364 of these Directions. \n(2) to avail of pre-shipment credit in foreign currency and discount / rediscounting \nof the export bills in foreign currency under EBR Scheme."} |
| {"text": "(3) to avail of pre-shipment credit in rupees and then convert drawal into PCFC at \nthe discretion of the bank. \n297. Choice of currency \n(1) The facility shall be extended in one of the convertible currencies viz. US \nDollars, Pound Sterling, Japanese Yen, Euro, etc. \n(2) To enable the exporters to have operational flexibility, it shall be in order for \nbanks to extend PCFC in one convertible currency in respect of an export order \ninvoiced in another convertible currency. For example, an exporter can avail of \nPCFC in US Dollar against an export order invoiced in Euro. The risk and cost \nof cross currency transaction shall be that of the exporter. \n(3) The bank shall extend PCFC for exports to ACU countries. \n(4) The applicable benefit to the exporters shall accrue only after the realisation of \nthe export bills or when the resultant export bills are rediscounted on ‘without \nrecourse’ basis. \nF.2 \nSource of funds for banks \n298. The foreign currency balances available with the bank in Exchange Earners \nForeign Currency (EEFC) Accounts, Resident Foreign Currency Accounts RFC(D) \nand Foreign Currency (Non-Resident) Accounts (Banks) Scheme may be utilised \nfor financing the pre-shipment credit in foreign currency. \n299. The bank shall also utilise the foreign currency balances available under \nEscrow Accounts and Exporters Foreign Currency Accounts for the purpose, \nsubject to ensuring that the requirements of funds by the account holders for \npermissible transactions are met and the limit prescribed for maintaining maximum \nbalance in the account under broad based facility is not exceeded. \n300. Foreign currency borrowings \n(1) In addition, the bank may arrange for borrowings from abroad. The bank shall \nnegotiate lines of credit with overseas banks for the purpose of grant of PCFC \nto exporters without the prior approval of the Reserve Bank. \n(2) The bank shall avail of lines of credit from other banks in India if they are not in \na position to raise loans from abroad on their own, provided the bank does not \nhave a branch abroad. The spread between the borrowing and lending bank is \nleft to the discretion of the banks concerned."} |
| {"text": "(3) The bank shall draw on the line of credit arranged only to the extent of loans \ngranted by them to the exporters under the PCFC. However, where the \noverseas bank making available the line of credit stipulates a minimum amount \nfor drawals which shall not be very large, the small unutilised portion shall be \nmanaged by the bank within its foreign exchange position and Aggregate Gap \nLimit (AGL). Similarly, any pre-payment by the exporter shall also be taken \nwithin the foreign exchange position and AGL limits. \n301. In case the exporters have arranged for the suppliers’ credit for procuring \nimported inputs, the PCFC facility shall be extended by the banks only for the \npurpose of financing domestic inputs for exports. \n302. The bank shall use foreign currency funds borrowed in terms of Notification No. \nFEMA.3(R)/2018-RB dated December 17, 2018 as also foreign currency funds \ngenerated through buy-sell swaps in the domestic forex market for granting pre-\nshipment credit in Foreign Currency (PCFC) subject to adherence to Aggregate \nGap Limit (AGL) in terms of Master Direction - Risk Management and Inter-Bank \nDealings. \nF.3 \nInterest on Export Credit in Foreign Currency \n303. The bank is free to determine interest rates on export credit in foreign currency \nusing any widely accepted Alternative Reference Rate (ARR) in the currency \nconcerned, in accordance with their Board-approved policy and subject to the \nrelevant guidelines contained in the Reserve Bank of India (Commercial Banks – \nInterest Rates on Advances) Directions, 2025, or any other applicable direction / \ncircular. \nF.4 \nPeriod of credit \n304. The PCFC shall be available for a maximum period of 360 days. Any extension \nof the credit shall be subject to the same terms and conditions as applicable for \nextension of rupee packing credit. \n305. Further extension shall be subject to the terms and conditions fixed by the bank \nconcerned and if no export takes place within 360 days, the PCFC shall be \nadjusted at T.T. selling rate for the currency concerned. In such cases, the bank \nshall arrange to remit foreign exchange to repay the loan or line of credit raised \nabroad and interest without prior permission of the Reserve Bank."} |
| {"text": "F.5 \nExport Credit in Foreign Currency to Protect Exporters from Rupee \nFluctuations \n306. Banks extend export credit in Indian Rupees as well as in foreign currency, \nsuch as Pre-Shipment Credit in Foreign Currency (PCFC) and Post Shipment \nCredit in Foreign Currency (PSCFC), as per their own internal lending policy within \nthe overall regulatory framework prescribed by the Reserve Bank. \n307. The export credit limits are calculated in Indian Rupees and the limit is \napportioned between Rupee and foreign currency components depending upon \nthe borrowers' requirement. While the overall export credit limits are fixed in Indian \nRupees, the foreign currency component of export credit fluctuates based on the \nprevailing exchange rates. \n308. It is observed that whenever there is a depreciation of Indian Rupee : \n(1) the unavailed foreign currency component of export credit gets reduced; \n(2) the foreign currency component of export credit already availed gets revalued \nat a higher value in terms of Indian Rupees resulting in the exporter being \nasked to reduce their exposure by part payment or where the export credit limit \nis not fully disbursed, the available limit for the borrower reduces, depriving \nexporter of funds. \n309. The bank shall consider denominating export credit facilities in foreign currency \nto ensure that exporters are not adversely impacted by Rupee fluctuations. \n310. The bank shall compute the overall export credit limits of the borrowers on an \nongoing basis say monthly, based on the prevalent position of current assets, \ncurrent liabilities and exchange rates and re-allocate limit towards export credit in \nforeign currency, as per the bank's own policy. This may result in increasing or \ndecreasing the Indian Rupee equivalent of foreign currency component of export \ncredit. \n311. Alternatively, the bank shall denominate foreign currency (FC) component of \nexport credit in foreign currency only with a view to ensuring that the exporters are \ninsulated from Rupee fluctuations. The FC component of export credit, sanctioned, \ndisbursed and outstanding will be maintained and monitored in FC. However, for \ntranslation of FC assets in the banks' book, the bank shall refer to Reserve Bank |
| textof India (Commercial Banks – Financial Statements: Presentation and \nDisclosures) Directions, 2025. \nF.6 \nDisbursement of PCFC \n312. In case full amount of PCFC or part thereof is utilised to finance domestic input, \nthe bank shall apply appropriate spot rate for the transaction. \n313. As regards the minimum lots of transactions, it is left to the operational \nconvenience of the bank to stipulate the minimum lots taking into account the \navailability of its own resources. However, while fixing the minimum lot, the bank \nshall take into account the needs of their small customers also. \n314. The bank shall take steps to streamline their procedures so that no separate \nsanction is needed for PCFC once the packing credit limit has been authorised \nand the disbursement is not delayed at the branches. \nF.7 \nLiquidation of PCFC Account \n315. PCFC shall be liquidated out of proceeds of export documents on their \nsubmission for discounting / rediscounting under the EBR Scheme as detailed in \nparagraphs 340 to 364 of these Directions or by grant of foreign currency loans \n(DP Bills). Subject to mutual agreement between the exporter and the banker, it \nshall also be repaid / prepaid out of balances in EEFC A/c as also from rupee \nresources of the exporter to the extent exports have actually taken place. \n316. Packing credit in excess of F.O.B. value \nIn certain cases, (viz. agro based products like HPS groundnut, defatted & deoiled \ncakes, tobacco, pepper, cardamom, cashew nuts, etc.) where packing credit \nrequired is in excess of FOB value, PCFC shall be available only for exportable \nportion of the produce. \n317. Substitution of order / commodity \nRepayment / liquidation of PCFC shall be with export documents relating to any \nother order covering the same or any other commodity exported by the exporter or \namount of balance in the EEFC Account. While allowing substitution of contract in \nthis way, the bank shall ensure that it is commercially necessary and unavoidable. \nThe bank shall also satisfy about the valid reasons as to why PCFC extended for \nshipment of a particular commodity cannot be liquidated in the normal method. As |
| textfar as possible, the substitution of contract shall be allowed if the exporter \nmaintains account with the same bank or it has the approval of the members of \nthe consortium, if any. \nF.8 \nCancellation / non-execution of export order \n318. In case of cancellation of the export order for which the PCFC was availed of \nby the exporter from the bank, or if the exporter is unable to execute the export \norder for any reason, the exporter may repay the loan together with accrued \ninterest thereon, by purchasing foreign exchange (principal + interest) from \ndomestic market through the bank. \n319. It shall also be in order for the bank to remit the amount to the overseas bank, \nprovided the PCFC was made available to exporter from the line of credit obtained \nfrom that bank. \n320. The bank shall extend PCFC to such exporters subsequently, after ensuring \nthat the earlier cancellation of PCFC was due to genuine reasons. \nF.9 \nRunning Account Facility for all commodities \n321. The bank shall extend the ‘Running Account’ facility under the PCFC Scheme \nto exporters for all commodities, on the lines of the facility available under rupee \ncredit, subject to the following conditions: \n(1) The facility shall be extended provided the need for ‘Running Account’ facility \nhas been established by the exporters to the satisfaction of the bank. \n(2) The bank shall extend the facility only to those exporters whose track record \nhas been good. \n(3) In all cases, where pre-shipment credit ‘Running Account’ facility has been \nextended, the LCs or firm orders shall be produced within a reasonable period \nof time. \n(4) The PCFC shall be marked-off on the ‘First-in-First-Out’ basis. \n(5) PCFC shall also be marked-off with proceeds of export documents against \nwhich no PCFC has been drawn by the exporter. \n322. The bank shall closely monitor the production of firm order or LC subsequently \nby exporters and also the end-use of funds. It shall be ensured that no diversion \nof funds is made for domestic use. In case of non-utilisation of PCFC drawals for |
| textexport purposes, the penal provisions stated above shall be made applicable and \nthe ‘Running Account’ facility shall be withdrawn for the concerned exporter. \n323. The bank shall take any prepayment by the exporter under PCFC scheme \nwithin their foreign exchange position and Aggregate Gap Limit (AGL) as indicated \nin paragraph 300(3) of these Directions. With the extension of ‘Running Account’ \nfacility, mismatches are likely to occur for a longer period involving cost to the \nbanks. The bank shall charge the exporters the funding cost, if any, involved in \nabsorbing mismatches in respect of the prepayment beyond one month period. \nF.10 Forward Contracts \n324. In terms of paragraph 297 of these Directions, PCFC can be extended in any \nof the convertible currencies in respect of an export order invoiced in another \nconvertible currency. The bank shall also allow an exporter to book forward \ncontract on the basis of confirmed export order prior to availing of PCFC and \ncancel the contract (for portion of drawal used for imported inputs) at prevailing \nmarket rates on availing of PCFC. \n325. The bank shall allow customers to seek cover in any permitted currency of their \nchoice which is actively traded in the market, subject to ensuring that the customer \nis exposed to exchange risk in a permitted currency in the underlying transaction. \n326. While allowing forward contracts under the scheme, banks shall ensure \ncompliance of the basic Foreign Exchange Management requirement that the \ncustomer is exposed to an exchange risk in the underlying transaction at different \nstages of the export finance. \nF.11 Sharing of EPC under PCFC \n327. The rupee export packing credit may be shared between an export order holder \nand the manufacturer of the goods to be exported. Similarly, the bank shall extend \nPCFC also to the manufacturer on the basis of the disclaimer from the export order \nholder through its bank. \n328. PCFC granted to the manufacturer can be repaid by transfer of foreign currency \nfrom the export order holder by availing of PCFC or by discounting of bills. The \nbank shall ensure that no double financing is involved in the transaction and the |
| texttotal period of packing credit is limited to the actual cycle of production of the \nexported goods. \n329. The facility shall be extended where the banker or the leader of consortium of \nbanks is the same for both the export order holder and the manufacturer or, the \nbanks concerned agree to such an arrangement where the bankers are different \nfor export order holder and manufacturer. The sharing of export benefits shall be \nleft to the mutual agreement between the export order holder and the \nmanufacturer. \nF.12 Supplies from One EOU/EPZ/SEZ Unit to another EOU/EPZ/SEZ Unit \n330. PCFC shall be made available to both, the supplier EOU / EPZ / SEZ unit and \nthe receiver EOU / EPZ / SEZ unit. \n331. The PCFC for supplier EOU / EPZ / SEZ unit shall be for supply of raw materials \n/ components of goods which will be further processed and finally exported by \nreceiver EOU / EPZ / SEZ unit. \n332. The PCFC extended to the supplier EOU / EPZ / SEZ unit shall have to be \nliquidated by receipt of foreign exchange from the receiver EOU / EPZ / SEZ unit, \nfor which purpose, the receiver EOU / EPZ / SEZ unit may avail of PCFC. \n333. The stipulation regarding liquidation of PCFC by payment in foreign exchange \nshall be met in such cases not by negotiation of export documents but by transfer \nof foreign exchange from the banker of the receiver EOU / EPZ / SEZ unit to the \nbanker of supplier EOU / EPZ / SEZ unit. Thus, there shall not normally be any \npost-shipment credit in the transaction from the supplier EOU / EPZ / SEZ unit’s \npoint of view. \n334. In all such cases, it shall be ensured by banks that there is no double financing \nfor the same transaction. Needless to add, the PCFC to receiver EOU / EPZ / SEZ \nunit shall be liquidated by discounting of export bills. \nF.13 Deemed Exports \n335. PCFC shall be allowed for ‘deemed exports’ only for supplies to projects \nfinanced by multilateral / bilateral agencies / funds. PCFC released for ‘deemed \nexports’ shall be liquidated by grant of foreign currency loan at post-supply stage, \nfor a maximum period of 30 days or up to the date of payment by the project |
| textauthorities, whichever is earlier. PCFC shall also be repaid / prepaid out of \nbalances in EEFC A/c as also from rupee resources of the exporter to the extent \nsupplies have actually been made. \nF.14 Other aspects \n336. The applicable benefits such as credit of eligible percentage of export proceeds \nto EEFC Account etc. to the exporters shall accrue only after realisation of the \nexport bills and not at the stage of conversion of pre-shipment credit to post-\nshipment credit (except when bills are discounted / rediscounted 'without \nrecourse'). \n337. For the purpose of reckoning the bank’s performance in extending export credit, \nthe rupee equivalent of the PCFC shall be taken into account. \nF.15 Diamond Dollar Account (DDA) Scheme \n338. In terms of the extant Foreign Trade Policy, firms / companies dealing in \npurchase / sale of rough or cut and polished diamonds, diamond studded jewellery, \nwith good track record of at least two years in import or export of diamonds with \nan annual average turnover of ₹3 crore or above during the preceding three \nlicensing years (from April to March) are permitted to carry out their business \nthrough designated Diamond Dollar Accounts (DDAs). \n339. Under the DDA Scheme, the bank shall liquidate PCFC granted to DDA holders \nby dollar proceeds from sale of rough, cut and polished diamonds by them to other \nDDA holders. (For details regarding the Diamond Dollar Accounts, bank may refer \nto Foreign Exchange Management (Foreign currency accounts by a person \nresident in India) Regulations, 2015, issued by FED vide Notification No. FEMA 10 \n(R) /2015-RB dated January 21, 2016, as amended from time to time. \nG. Post-shipment Credit in Foreign Currency: Rediscounting of Export Bills \nAbroad Scheme (EBR) \n340. The bank shall utilise the foreign exchange resources available with it in \nExchange Earners Foreign Currency Accounts (EEFC), Resident Foreign \nCurrency Accounts (RFC), Foreign Currency (Non-Resident) Accounts (Banks) \nScheme, to discount usance bills and retain them in their portfolio without resorting |
| textto rediscounting. The bank can rediscount export bills abroad at rates linked to \ninternational interest rates at post- shipment stage. \nG.1 \nScheme \n341. It will be comparatively easier to have a facility against bills portfolio (covering \nall eligible bills) than to have rediscounting facility abroad on bill-by-bill basis. \nThere shall, however, be no bar if rediscounting facility on bill-to-bill basis is \narranged by a bank in case of any particular exporter, especially for large value \ntransactions. \n342. The bank shall arrange a \ (BAF) for rediscounting \nthe export bills without any margin and duly covered by collateralised documents. \n343. Each bank can have its own BAF limit(s) fixed with an overseas bank or a \nrediscounting agency or an arrangement with any other agency such as factoring \nagency (in case of factoring arrangement, it shall be on ‘without recourse’ basis \nonly). \n344. The exporters, on their own, can arrange for themselves a line of credit with an \noverseas bank or any other agency (including a factoring agency) for discounting \ntheir export bills direct subject to the following conditions: \n(1) Direct discounting of export bills by exporters with overseas bank and / or any \nother agency shall be done only through the branch of an authorized dealer \ndesignated by them for this purpose. \n(2) Discounting of export bills shall be routed through designated bank / authorized \ndealer from whom the packing credit facility has been availed of. In case, these \nare routed through any other bank, the latter will first arrange to adjust the \namount outstanding under packing credit with the concerned bank out of the \nproceeds of the rediscounted bills. \n345. The limits granted to banks by overseas banks / discounting agencies under \nBAF shall not be reckoned for the purpose of borrowing limits fixed by Foreign \nExchange Department of the Reserve Bank for them. \nG.2 \nEligibility criteria \n346. The Scheme shall cover mainly export bills with usance period up to 180 days \nfrom the date of shipment (inclusive of normal transit period and grace period, if |
| textany). There is, however, no bar to include demand bills, if overseas institution has \nno objection to it. \n347. In case borrower is eligible to draw usance bills for periods exceeding 180 days \nas per the extant instructions of Foreign Exchange Department, Post-shipment \nCredit under the EBR shall be provided beyond 180 days. \n348. The facility under the Scheme of Rediscounting shall be offered in any \nconvertible currency. \n349. The bank can extend the EBR facility for exports to ACU countries. \n350. For operational convenience, the BAF Scheme shall be centralised at a branch \ndesignated by the bank. There shall, however, be no bar for other branches of the \nbank to operate the scheme as per the bank's internal guidelines / instructions. \nG.3 \nSource of On-shore funds \n351. In the case of demand bills [subject to paragraph 346 of these Directions], these \nshall be routed through the existing post-shipment credit facility or by way of \nforeign exchange loans to the exporters out of the foreign currency balances \navailable with banks in the Schemes ibid. \n352. To facilitate the growth of local market for rediscounting export bills, \nestablishment and development of an active inter-bank market is desirable. It is \npossible that the bank holds bills in their own portfolio without rediscounting. \nHowever, in case of need, the bank shall also have access to the local market, \nwhich will enable the country to save foreign exchange to the extent of the cost of \nrediscounting. Further, as different banks may be having BAF for varying amounts, \nit shall be possible for a bank which has balance available in its limit to offer \nrediscounting facility to another bank which may have exhausted its limit or could \nnot arrange for such a facility. \n353. The bank shall avail of lines of credit from other banks in India if they are not in \na position to raise loans from abroad on their own or they do not have branches \nabroad \n354. The bank shall also use foreign currency funds borrowed in terms of Notification \nNo. FEMA.3(R)/2018-RB dated December 17, 2018 as also foreign currency funds \ngenerated through buy - sell swaps in the domestic forex market for granting facility"} |
| {"text": "of rediscounting of Export Bills Abroad (EBR) subject to adherence to Aggregate \nGap Limit (AGL) in terms of Master Direction - Risk Management and Inter-Bank \nDealings. \nG.4 \nFacility of Rediscounting 'with recourse' and 'without recourse' \n355. It is recognized that it will be difficult to get ‘without recourse’ facility from abroad \nunder BAF or any other facility. Therefore, the bills may be rediscounted ‘with \nrecourse’. However, if an AD is in a position to arrange ‘without recourse’ facility \non competitive terms, it shall avail itself of such a facility. \nG.5 \nAccounting aspects \n356. The rupee equivalent of the discounted value of the export bills shall be payable \nto the exporter and the same shall be utilised to liquidate the outstanding export \npacking credit. \n357. As the discounting of bills / extension of foreign exchange loans (DP bills) shall \nbe in actual foreign exchange, the bank shall apply appropriate spot rate for the \ntransactions. \n358. The rupee equivalents of discounted amounts / foreign exchange loan shall be \nheld in the bank’s books distinct from the existing post-shipment credit accounts. \n359. In case of overdue bills, the bank shall charge interest from the due date to the \ndate of crystallization as per the interest rate policy of the bank. \n360. In the event of export bill not being paid, the bank shall remit the amount \nequivalent to the value of the bill earlier discounted, to the overseas bank / agency \nwhich had discounted the bill, without the prior approval of the Reserve Bank. \nG.6 \nRestoration of limits and availability of export benefits such as EEFC \nAccount \n361. As stated in paragraph 355 of these Directions, ‘without recourse’ facility may \nnot generally be available. Thus, the restoration of exporter’s limits and the \navailability of export benefits, such as credit to EEFC accounts, in case of ‘with \nrecourse’ facility, shall be effected only on realisation of export proceeds and not \non the date of discounting / rediscounting of the bills, However, if the bills are \nrediscounted ‘without recourse’, the restoration of exporter’s limits and availability \nof export benefits shall be given effect immediately on rediscounting."} |
| {"text": "G.7 \nECGC cover \n362. In the case of export bills rediscounted ‘with recourse’, there shall not be any \nchange in the existing system of coverage provided by ECGC Ltd as the liability of \nthe exporter continues till the relative bill is retired / paid. In other cases, where the \nbills are rediscounted ‘without recourse’, the liability of ECGC ceases as soon as \nthe relative bills are rediscounted. \nG.8 \nExport credit performance \n363. Only the bills rediscounted abroad ‘with recourse’ basis and outstanding shall \nbe taken into account for the purpose of export credit performance. The bills \nrediscounted abroad ‘without recourse’ shall not count for the export credit \nperformance. \n364. Bills rediscounted ‘with recourse’ in the domestic market could get reflected \nonly in the case of the first bank discounting the bills as that bank alone will have \nrecourse to the exporter and the bank rediscounting shall not reckon the amount \nas export credit. \nH. Gold Card Scheme for exporters \n365. The bank shall lay down the criteria for issuing Gold Cards under the scheme \nto creditworthy exporters having good track record, including those in MSME \nsector. The bank shall clearly specify the benefits it shall be offering to Gold Card \nholders, based on the following salient features of the scheme. \n366. All creditworthy exporters, including those in small and medium sectors, with \ngood track record shall be eligible for issue of Gold Card by the bank as per the \ncriteria laid down by it. \n367. The scheme shall not be applicable for exporters placed in Specific Approval \nList (SAL) by ECGC or having overdue bills in excess of 10 per cent of the previous \nyear’s turnover. \n368. Gold Card holder exporters, depending on their track record and credit \nworthiness, shall be granted better terms of credit including rates of interest than \nthose extended to other exporters by the bank. \n369. Applications for credit shall be processed at norms simpler and under a process \nfaster than for other exporters."} |
| {"text": "370. The bank shall clearly specify the benefits it shall be offering to Gold Card \nholders. \n371. The charges schedule and fee-structure in respect of services provided by the \nbank to exporters under the Scheme shall be relatively lower than those provided \nto other exporters. \n372. The sanction and renewal of the limits under the Scheme shall be based on a \nsimplified procedure to be decided by the bank. Taking into account the anticipated \nexport turnover and track record of the exporter the bank shall determine need-\nbased finance with a liberal approach. \n373. 'In-principle' limits shall be sanctioned for a period of three years with a \nprovision for automatic renewal subject to fulfilment of the terms and conditions of \nsanction. \n374. A stand-by limit of not less than 20 per cent of the assessed limit shall be \nadditionally made available to facilitate urgent credit needs for executing sudden \norders. In the case of exporters of seasonal commodities, the peak and off-peak \nlevels shall be appropriately specified. \n375. In case of unanticipated export orders, norms for inventory shall be relaxed, \ntaking into account the size and nature of the export order. \n376. Requests from card holders shall be processed quickly by the bank within 25 \ndays / 15 days and seven days for fresh applications / renewal of limits and ad hoc \nlimits, respectively. \n377. Gold Card holders shall be given preference in the matter of granting of packing \ncredit in foreign currency. \n378. The bank may consider waiver of collaterals and exemption from the ECGC’s \nECIB schemes on the basis of card holder's creditworthiness and track record. \n379. The facility of further value addition to their cards through supplementary \nservices like ATM, Internet banking, international debit / credit cards may be \ndecided by the issuing bank. \n380. The applicable rate of interest to be charged under the Gold Card Scheme shall \nnot be more than the general rate for export credit in the respective bank. In \nkeeping with the spirit of the Scheme, the bank shall endeavour to provide the best |
| textrates possible to Gold Card holders on the basis of their rating and past \nperformance. \n381. Gold Card holders, on the basis of their track record of timely realization of \nexport bills, shall be considered for issuance of foreign currency credit cards for \nmeeting urgent payment obligations, etc. \n382. The bank shall ensure that the PCFC requirements of the Gold Card holders \nare met by giving them priority over non-export borrowers with regard to granting \nloans out of their FCNR(B) funds, etc. \n383. The bank shall consider granting term loans in foreign currency in deserving \ncases out of their FCNR(B), RFC, etc. funds (other than from their overseas \nborrowing limits prescribed by FED, RBI). \n384. The instructions relating to the Gold Card Scheme for Exporters shall be strictly \nimplemented and the branch level functionaries suitably sensitised in this regard. \nFurther, the bank shall also provide adequate publicity to the Scheme for the \nbenefit of exporters. \nI. \n'On line' credit to exporters \n385. Banks provide 'Line of Credit' normally for one year which is reviewed annually. \nIn case of delay in renewal, the sanctioned limits shall be allowed to continue \nuninterrupted and urgent requirements of exporters shall be met on ad hoc basis. \n386. In case of established exporters having satisfactory track record, the bank shall \nconsider sanctioning a 'Line of Credit' for a longer period, say, three years, with in-\nbuilt flexibility to step-up / step-down the quantum of limits within the overall \nassessed outer limits. The step-up limits will become operative on attainment of \npre-determined performance parameters by the exporters. The bank shall obtain \nsecurity documents covering the outer limit sanctioned to the exporters for such \nlonger period. \n387. In case of export of seasonal commodities, agro-based products, etc., the bank \nshall sanction Peak / Non-peak credit facilities to exporters. \n388. The bank shall permit interchangeability of pre-shipment and post- shipment \ncredit limits. |
| text389. Assessment of export credit limits shall be 'need based' and not directly linked \nto the availability of collateral security. As long as the requirement of credit limit is \njustified on the basis of the exporter's performance and track record, the credit \nshall not be denied merely on the grounds of non-availability of collateral security. \nJ. Other Provisions \n390. Waiver of submission of orders or LCs for availing pre-shipment credit \nThe bank shall waive, ab initio, submission of order / LC in respect of exporters \nwith good track record and put in place the system of obtaining periodical \nstatement of outstanding orders / LCs on hand. The same shall be incorporated in \nthe sanction proposals as well as in the sanction letters issued to exporters and \nappropriately brought to the notice of ECGC. Further, if such waivers are permitted \nat a time subsequent to sanction of export credit limits with the approval of the \nappropriate authority, the same shall be incorporated in the terms of sanction by \nway of amendments and communicated to ECGC. \n391. Fast track clearance of export credit \nWhere feasible, the bank shall set up a 'Credit Committee' at specialized branches \nand at administrative offices, for sanctioning working capital facilities to exporters. \nThe 'Credit Committee' shall have sufficiently higher sanctioning powers. \n392. Pre-shipment \ncredit \nto \nDiamond \nExporters \n- \nConflict \nDiamonds - \nImplementation of Kimberley Process Certification Scheme (KPCS) \nIndia, among other countries, has adopted a UN mandated new Kimberley \nProcess Certification Scheme to ensure that no rough diamonds mined and \nillegally traded enter the country. Therefore, import of diamonds into India shall be \naccompanied by Kimberley Process Certificate (KPC). Similarly, exports from India \nshall also be accompanied by the KPC to the effect that no conflict / rough \ndiamonds have been used in the process. The KPCs shall be verified / validated \nin the case of imports / exports by the Gem and Jewellery Export Promotion \nCouncil. In order to ensure the implementation of Kimberley Process Certification \nScheme, the bank shall obtain an undertaking in the format given in Annex - III \nfrom such of the clients who have been extended credit for doing any business \nrelating to diamonds."} |
| {"text": "393. Consortium Finance – Sanction of Credit \nIn the case of consortium finance, once the consortium has approved the \nassessment, member banks shall simultaneously initiate their respective sanction \nprocesses. \n394. Credit Monitoring Arrangement - Export Credit \n(1) The bank shall ensure that the credit requirements of the export sector are \npromptly met and, additional credit needs of exporters for implementing export \norders, shall be met in full even if sanction of such additional credit exceeds \nMPBF. \n(2) The bank shall take certain steps to ensure timely flow of need-based credit to \ntheir exporter-clients as also to inform us the action taken in this regard besides \nmonitoring the flow of credit to the export sector as also performance of such \nexporter-clients. \n(3) The bank shall reach a certain minimum level of export credit, viz., equivalent \nto ten per cent of each bank's net credit. Strict enforcement of this may please \nbe ensured. \n(4) The bank shall ensure that there is a system of monitoring the flow of export \ncredit as also whether the export credit disbursement is in tune with the export \nperformance of your exporter-borrowers. \n395. Compliance of Foreign Exchange Management Act, 1999 \nThe bank shall adhere to the directions issued under Foreign Exchange \nManagement Act, 1999 as amended from time to time. \nK. Special Measures \n396. Trade Relief Measures \nTo mitigate the burden of debt servicing brought about by trade disruptions caused \nby global headwinds and to ensure the continuity of viable businesses, banks \nextending export credit finance may provide relief measures to eligible borrowers, \nas specified under Reserve Bank of India (Trade Relief Measures) Directions, \n2025 dated November 14, 2025. The Directions inter alia include a defined sunset \nclause for the measures. |
| textChapter XVI - Non-Fund Based (NFB) Credit Facilities \nBackground: Non-fund based (NFB) facilities like guarantees, letters of credit, co-\nacceptances etc. facilitate effective credit intermediation and smooth business \ntransactions. In order to harmonize and consolidate guidelines covering these \nfacilities and to broaden the funding sources for infrastructure financing, the Reserve \nBank had issued the following guidelines on NFB facilities. \n397. Within this Chapter, the term Regulated Entity (RE) or Regulated Entities (REs) \nshall refer to: \n(1) Commercial Banks (including Regional Rural Banks and Local Area Banks). \n(2) Primary (Urban) Co-operative Banks (UCBs) / State Co-operative Banks \n(StCBs) / Central Co-operative Banks (CCBs). \n(3) All India Financial Institutions (AIFIs). \n398. The Directions in this Chapter shall not apply to the derivative exposures of the \nbank, other than the general conditions as laid down in this Chapter. \n399. \n29[*****] \nA. General Conditions \n400. The credit policy of the bank shall incorporate suitable provisions for issue of \nNFB facilities, inter alia, covering aspects relating to type of NFB facilities, limits \ngranted, credit appraisal, security requirement, fraud prevention, overall \nmonitoring mechanism including post-sanction monitoring, delegation matrix, audit \nand internal controls, compliance to uniform standards issued by standard setting \nbodies and other safeguards. \n401. The bank shall issue a NFB facility only on behalf of a customer having funded \ncredit facility from the bank. \nProvided that this clause shall not be applicable in respect of: \n(1) Derivative contracts entered into by the bank with counterparty. \n(2) Partial Credit enhancement facility, as permitted under this Chapter. \n \n29 Deleted with effect from April 1, 2026 |
| text(3) NFB facilities issued based on the counter guarantee of another RE, as \npermitted under this Chapter. \n(4) NFB facilities on behalf of an obligor who has not availed any fund based \nfacility from any RE in India. \n(5) NFB facilities extended by the bank against No Objection Certificate issued by \nthe RE / REs which has / have provided fund based facility to the obligor. \n(6) NFB facilities which are fully secured by eligible financial collateral. \nExplanation: The eligible financial collateral specified herein shall be as defined \nunder Reserve Bank of India (Commercial Banks – Prudential Norms on \nCapital Adequacy) Directions, 2025. \n402. The bank shall not issue a NFB facility to any entity assuring redemption / \nrepayment of funds raised by any entity via deposits, issuance of bonds, or in any \nother form, unless specifically permitted under any regulatory guidelines / \ndirections issued by the Reserve Bank. \n403. Once a NFB facility devolves and is converted into a fund based facility, then the \nprudential norms shall be as applicable to fund based facilities. \nB. Guarantees \n404. In general, a guarantee (or a counter-guarantee) issued by the bank (guarantor) \nshall be irrevocable (i.e., there shall be no clause in the contract that would allow \nthe guarantor to unilaterally cancel the same), unconditional (i.e. there shall be no \nclause in the contract that could prevent the bank from being obliged to pay out in a \ntimely manner in the event that the original counterparty fails to meet its obligation), \nincontrovertible and shall contain a clear mechanism for honouring the same \nwithout demur as and when invoked. \n405. The bank shall put in place suitable internal aggregate / individual ceilings for \nissuance of guarantees in general and unsecured guarantees in particular. \n406. The provisions of the internal policy relating to guarantees shall, inter alia, \naddress aspects related to invocation and settlement mechanism, claim period, \ntenor, fee / commission / applicable charges, timelines for release of security, \nrenewal, fraud prevention measures etc. |
| text407. A bank shall honour the guarantee issued by it as and when invoked in \naccordance with the terms and conditions of the guarantee deed unless there is a \ncourt order restraining the same. \nC. Usage of electronic-Guarantee \n408. Wherever a bank issues an electronic Guarantee, it shall frame a standard \noperating procedure (SOP) aimed at minimization of manual intervention; meeting \nsystem integration requirements; ensuring technological compatibility between the \nbank’s interface and the electronic Guarantee platforms, audit and internal controls \netc. The SOP shall, inter alia, consider the aspects mentioned at paragraphs 409 \nto 413 of these Directions. \n409. Policy and SOP for issuance of electronic Guarantees \n(1) The bank shall have suitable enabling provisions in its credit policy which shall, \ninter alia, envisage the adoption of electronic Guarantees, the risk controls to \nbe put in place, delegation of authority, the monitoring process, etc. \n(2) The bank shall put in place appropriate SOPs for user reference, detailing all \nthe steps to be followed during the entire electronic Guarantee lifecycle. \nElectronic Guarantees shall not be issued without ensuring that the underlying \ntransaction has been duly reflected in the Core Banking System (CBS)/ Trade \nFinance System (TFS). \n410. Integration of the systems with regard to issuance of electronic Guarantees \n(1) The bank shall have a strong control environment covering the policies, \nprocesses and systems; sound internal controls; and appropriate risk \nmitigation strategies for all operations pertaining to electronic Guarantees. \n(2) The bank shall ensure that all features relating to the entire lifecycle events of \nelectronic Guarantees such as issuance, amendment, invocation, cancellation \netc. shall be available on its platform through suitable integration with the \nelectronic Guarantee service provider. \n(3) The CBS / TFS shall be integrated with the APIs and other related messaging \nplatforms offered by the electronic Guarantee service provider, in Straight \nThrough Processing (STP) mode, without any manual intervention. \n411. User Roles for issuance of electronic Guarantees |
| text(1) The bank shall have an efficient system of ‘Maker, Checker and Authorizer’ for \nissuance and monitoring of electronic Guarantees, while ensuring strict access \ncontrol and an effective segregation of the role and accountability. \n(2) No role involved in electronic Guarantee issuance lifecycle shall violate \nprinciple of segregation of duties, four / six eye principle and no employee shall \nbe allocated roles / privileges across systems, applications that are conflicting \nin nature or in violation of four/ six eye principle. \n(3) The system access shall be provided only to specified users, and access \nthrough generic user IDs shall not be permitted. User review shall be \ncontinuous, at defined periodicity and identifiable at any point of time with \nrespective rights and privileges. The user privileges shall be decided on \ basis. \n412. Control Measures for issuance of electronic Guarantees \n(1) The bank shall have in place a system of periodical review and reconciliation \nof all the electronic Guarantees issued / modified / cancelled, during the \nspecified period. \n(2) The issuance of electronic Guarantees shall be mandatorily covered within the \nscope of concurrent audit and RBIA of the bank. \n413. Other aspects pertaining to issuance of electronic Guarantees \n(1) The robustness of the electronic Guarantee systems shall be part of the \nVulnerability Assessment / Penetration Testing (VA / PT), Information Systems \nAudit. \n(2) Dependence on the vendors for day-to-day transactions shall be avoided. \nAccess to production systems shall be provided to vendors only in a controlled \nenvironment, and audit trail shall be maintained. \n(3) Security Incident and Event Management (SIEM) tool shall be integrated with \nthe concerned servers and consoles / PCs connected to electronic Guarantee \nrelated critical systems directly in its VLAN to generate automatic alerts. \n(4) The bank shall integrate electronic Guarantee systems with Privileged User \nManagement Systems / Identity and Access Management systems. The logs of \nthe same shall be monitored through Security Operation Centre (SOC) setup. |
| text(5) Business Continuity Measures and contingency plans for system failures, shall \nbe put in place by the bank. \nD. Guarantee favouring another RE \n414. The bank shall not provide a guarantee favouring another RE to enable it to \nprovide any fund based credit facility to an obligor, unless specifically permitted by \nRBI. \nProvided that this clause shall not be applicable in case of credit facilities extended \nagainst guarantees pertaining to trade related transactions. \n415. However, the bank may provide a guarantee favouring another RE for a NFB \nfacility extended by the latter. Such guarantee issued by a RE shall be treated as \nan exposure on the obligor on whose behalf the guarantee has been issued by it, \nfor all purposes including for the calculation of capital adequacy. The exposure of \nthe RE extending credit facility against a guarantee shall be treated as a claim / \nexposure on the RE which is providing the counter guarantee. \nE. Co-acceptances \n416. Only genuine trade bills shall be co-accepted, and it shall be ensured that the \ngoods covered by bills co-accepted are actually received in the stock accounts of \nthe borrowers. \n417. Proper records of the bills co-accepted for each customer shall be maintained, \nso that the commitments for each customer and the total commitments at a branch \ncan be readily ascertained, and these shall be part of internal audit. \n418. The bank shall not co-accept bills drawn by another lender or where the buyer \n/ seller has received funding for the underlying trade transaction from any lender. \nF. Guarantee and related business involving overseas current or capital \naccount transaction \n419. Banks permitted as Authorized Dealer (AD) may extend NFB facilities as \npermitted under the extant regulations / Directions issued under Foreign Exchange \nManagement Act, 1999, for bonafide current or capital account transaction, \nincluding guarantees in respect of debt or other liability incurred by an exporter on \naccount of exports from India. |
| text420. AD banks are also permitted to issue guarantee to or on behalf of a foreign \nentity, or any of its step-down subsidiary in which an Indian entity has acquired \ncontrol through the foreign entity, which is backed by a counter-guarantee or \ncollateral by the Indian entity or its group company. \nProvided that such guarantees shall not be issued by banks, including overseas \nbranches/ subsidiaries of Indian banks, for the purpose of raising loans/ advances \nof any kind by the foreign entity except in connection with the ordinary course of \nbusiness overseas. Further while extending such guarantees, banks shall ensure \neffective monitoring of the end use of such facilities and its conformity with the \nbusiness needs of such entities. \nG. Guarantees on behalf of Stock / Commodity Brokers \n421. Only Scheduled Commercial Banks (SCBs) may issue guarantees on behalf of \nstock/ commodity brokers in favour of stock/ commodity exchanges in lieu of \nsecurity deposit to the extent it is acceptable in the form of bank guarantee as laid \ndown by exchanges. SCBs may also issue guarantees in lieu of margin \nrequirements as per exchange regulations read along with other instructions \nissued by Reserve Bank in this regard from time to time. \nH. Partial Credit Enhancement – Salient Features \n422. The bank may provide Partial Credit Enhancement (PCE) to bonds issued by \ncorporates / special purpose vehicles (SPVs) for funding all types of projects and \nto bonds issued by Non-deposit taking NBFCs with asset size of ₹1,000 crore and \nabove registered with RBI (including HFCs). PCE may also be provided to bonds \nissued by Municipal Corporations subject to adherence to, inter alia, paragraph 134 \nof these Directions. The objective behind allowing banks to extend PCE is to enhance \nthe credit rating of the bonds issued so as to enable corporates to access the funds \nfrom the bond market on better terms. \n423. The credit policy of the bank shall incorporate suitable provisions for issue of \nPCE, covering issues such as quantum of PCE, underwriting standards, \nassessment of risk, pricing, setting limits, etc. \n424. PCE shall be a subordinated facility provided in the form of an irrevocable \ncontingent line of credit which will be drawn in case of shortfall in cash flows for \nservicing the bonds and thereby may improve the credit rating of the bond issue. |
| textThe contingent facility may, at the discretion of the PCE providing bank, be made \navailable as a revolving facility. \n425. A clear agreement documenting all aspects of this arrangement shall be signed \nbetween the promoter (bond issuer), the PCE providing bank, the bondholders \n(through the Trustee) and all other lenders to the project. The agreement to this \neffect shall be in the nature of a legally binding contract. The documentation for the \nfacility shall clearly define the circumstances under which the facility would be \ndrawn upon. \n426. The PCE exposure limit by a single bank shall be 50 per cent of the bond issue \nsize. The aggregate exposure limit of all PCE providers towards the PCE for a given \nbond issue has also been capped at 50 per cent of the bond issue size. \n427. The PCE facility shall be provided at the time of the bond issue and shall be \nirrevocable. PCE cannot be provided by way of guarantee. \n428. As the purpose of PCE by bank is to enable wide investor participation in the \ncorporate bond market, bank shall not invest in corporate bonds which are credit \nenhanced by any RE of the Reserve Bank. They may, however, provide other need \nbased credit facilities (funded and / or non-funded) to the corporate / SPV. \n429. Bank may offer PCE only in respect of bonds whose pre-enhanced rating are \nnot lower than “BBB” minus as issued by accredited External Credit Assessment \nInstitutions (ECAI). \n430. To be eligible for PCE, corporate bonds shall be rated by a minimum of two ECAI \nat all times. \n431. The rating reports, both initial and subsequent, shall disclose both standalone \ncredit rating (i.e., rating without taking into account the effect of PCE) as well as the \nenhanced credit rating (taking into account the effect of PCE). \n432. So long as the exposure of the bank to a project loan is classified as standard \nand the borrower is not in any financial distress (Refer to Reserve Bank of India \n(Commercial Banks – Resolution of Stressed Assets) Directions, 2025 for \nindicative list of signs of financial difficulty), providing a commercially priced PCE \nto enhance the rating of a bond issue, whose proceeds replace, in whole or in part, \nthe bank’s project loan, would not amount to restructuring. |
| text433. The PCE shall be available only for servicing the bond and not for any other \npurpose (such as funding acquisition of additional assets by the corporate, meeting \npart of the project cost or meeting recurring expenses of the corporate or servicing \nother lenders / creditors to the project etc.), irrespective of the seniority of claims \nof other creditors in relation to the bond holders. \n434. In case the PCE facility is partly drawn and interest accrues on the same, the \nunpaid accrued interest shall be excluded from the calculation of the remaining \namount available for drawing. \n435. In a waterfall mechanism, Credit Enhancement (CE) gets drawn only in a \ncontingent situation of cash flow shortfall for servicing a debt / bond etc., and not in \nthe normal course of business. Hence, such an event is indicative of financial \ndistress of the project. Keeping this aspect in view, a drawn tranche of the \ncontingent PCE facility shall be required to be repaid within 30 days from the date \nof its drawal (due date). The facility shall be treated as NPA if it remains \noutstanding for 90 days or more from the due date and provided for as per the \nusual asset classification and provisioning norms. In that event, the bank’s other \nfacilities to the borrower shall also be classified as NPA as per extant guidelines. \n436. The PCE providing bank shall observe the following exposure limits: \n(1) PCE exposure by the bank to a single counterparty or group of counterparties \nshall be within the overall regulatory exposure limits applicable to the bank. \n(2) The aggregate PCE exposure of the bank shall not exceed 20 per cent of its Tier \n1 capital. \nI. \nAdditional conditions for providing PCE to bonds of NBFCs and HFCs \n437. The tenor of the bond issued by NBFCs / HFCs for which PCE is provided shall \nnot be less than three years. \n438. The proceeds from the bonds backed by PCE from banks shall only be utilized \nfor refinancing the existing debt of the NBFCs / HFCs. The bank shall introduce \nappropriate mechanisms to monitor and ensure that the end-use condition is met. \n439. The exposure of a bank by way of PCEs to bonds issued by each such NBFC \n/ HFC shall be restricted to one per cent of capital funds of the RE within the extant \nsingle / group borrower exposure limits. |
| textJ. Other Aspects of PCE \n440. The effect of the PCE on the bond rating shall be disclosed in the bond offer \ndocument i.e., the rating of the bond without and with the PCE shall be disclosed. \n441. The bank shall ensure that the project assets, created out of the bond issue for \nwhich PCE has been provided by them, and the cash flows from the project are \nring fenced through an escrow account mechanism administered under a bond \ntrustee arrangement. The manner in which security interest in the project assets \nwould be shared by the lenders to the project, bond holders and banks providing \nthe PCE and the manner in which the project cash flows would be shared for \nservicing loans, if any, and the bonds and PCE, shall be decided and agreed upon \nbefore the issue of bonds and shall be properly documented. \n442. The project shall have a robust and viable financial structure even before the \ncredit enhancement is taken into account. Nevertheless, while providing PCE, the \nbank shall exercise necessary due diligence and credit appraisal, including making \ntheir own internal credit analysis/ rating. \n443. The bank shall honour the full PCE commitment irrespective of the asset \nclassification of the concerned borrower’s credit facilities. \n444. All extant regulatory prescriptions for credit and investment exposures by the \nbanks, unless specified otherwise in this Chapter, shall continue to apply. \n445. For disclosure of the details of NFB credit facilities, the bank shall be guided \nby Reserve Bank of India (Commercial Banks – Financial Statements: \nPresentation and Disclosures) Directions, 2025. \n446. The Directions in this Chapter have been issued without prejudice to Directions \nunder Foreign Exchange Management Act (FEMA), 1999; Foreign Exchange \nManagement (Guarantees) Regulations, 2000, notified vide Notification No. FEMA \n8/2000-RB dated May 03, 2000; as amended from time to time. \n447. Notwithstanding paragraph 446 above, bank shall comply with all the related \nregulatory norms including Reserve Bank of India (Commercial Banks – \nConcentration Risk Management) Directions, 2025. |
| textChapter XVII - Miscellaneous Provisions \nA. Bank finance to Government owned entities \n448. While extending finance to Government owned entities, banks shall specifically \nensure adherence with paragraphs 96, 134, 138 and 450 of these Directions, and \nensure that bank finance is not in lieu of or a substitute for budgetary resources \nenvisaged for a project, and that finance is not extended against receivables from \nGovernments. \nB. Loans and advances to Micro, Small & Medium Enterprises (MSMEs) \n449. Lending to MSMEs by the bank shall be guided by Master Direction - Lending \nto Micro, Small & Medium Enterprises (MSME) Sector. \nC. Bridge Loans against Receivable from Government \n450. The bank shall not extend bridge loans against amounts receivable from \nCentral / State Governments by way of subsidies, refunds, reimbursements, \ncapital contributions, etc. The following exemptions are, however, made: \n(1) The bank is permitted to finance subsidy receivable under current fertilizer \nsubsidy schemes of the Government of India that are akin to the erstwhile \nRetention Price Scheme (RPS) for periods up to 60 days in case of fertilizer \nindustry. It is clarified that the facility is being allowed as a purely temporary \nmeasure and the fertilizer companies should strengthen their financial position \ngradually so that they do not depend on the banks for finance against subsidy. \nNo other subsidy receivables such as, those in respect of claims raised by units \non the basis of expected revision in retention price because of escalation in \ncosts of inputs and in respect of freight, etc., shall be financed by the bank. \n(2) The bank may continue to grant finance against receivables from Government \nby exporters (viz. Duty Draw Back and IPRS) to the extent covered by the \nexisting instructions. |
| textChapter XVIII - Repeal and other provisions \nA. Repeal and saving \n451. With the issue of these Directions, the existing Directions, instructions, and \nguidelines relating to Credit Facilities as applicable to commercial banks stand \nrepealed, as communicated vide circular DOR.RRC.REC.302/33-01-010/2025-26 \ndated November 28, 2025. The Directions, instructions and guidelines already \nrepealed shall continue to remain repealed. \n452. Notwithstanding such repeal, any action taken or purported to have been taken, \nor initiated under the repealed Directions, instructions, or guidelines shall continue \nto be governed by the provisions thereof. All approvals or acknowledgments \ngranted under these repealed lists shall be deemed as governed by these \nDirections. Further, the repeal of these Directions, instructions, or guidelines shall \nnot in any way prejudicially affect: \n(1) any right, obligation or liability acquired, accrued, or incurred thereunder; \n(2) any, penalty, forfeiture, or punishment incurred in respect of any contravention \ncommitted thereunder; \n(3) any investigation, legal proceeding, or remedy in respect of any such right, \nprivilege, obligation, liability, penalty, forfeiture, or punishment as aforesaid; \nand any such investigation, legal proceedings or remedy may be instituted, \ncontinued, or enforced and any such penalty, forfeiture or punishment may be \nimposed as if those directions, instructions, or guidelines had not been \nrepealed. \nB. Application of other laws not barred \n453. The provisions of these Directions shall be in addition to, and not in derogation \nof the provisions of any other laws, rules, regulations, or directions, for the time \nbeing in force. \nC. Interpretations \n454. For the purpose of giving effect to the provisions of these Directions or in order \nto remove any difficulties in the application or interpretation of the provisions of \nthese Directions, the RBI may, if it considers necessary, issue necessary |
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