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The Reserve Bank of India on Friday said short-term credit either by way of suppliers’ credit or buyers’ credit will be available for intermediary trade transactions or merchanting.
Merchanting or intermediary trade transaction involves purchase of goods by Indian residents from non-residents and then reselling them to another non-resident directly without the goods touching Indian ports. The merchanting transactions will include the discounting of export leg Letter of Credit by a bank authorised to deal in foreign exchange, as in the case of import transactions, the central bank said.
Merchanting or intermediary trade transaction involves purchase of goods by Indian residents from non-residents and then reselling them to another non-resident directly without the goods touching Indian ports. The merchanting transactions will include the discounting of export leg Letter of Credit by a bank authorised to deal in foreign exchange, as in the case of import transactions, the central bank said.
Norms revised
According to the revised guidelines on merchanting transactions, the RBI said the entire process of intermediary trade transactions should be completed within an overall period of nine months and there should not be any outlay of foreign exchange beyond four months.
The commencement of merchanting would be the date of shipment / export leg receipt or import leg payment, whichever is first. The completion date would be the date of shipment / export leg receipt or import leg payment, whichever is the last.
Goods involved in merchanting transactions would be the ones that are permitted for exports / imports under the prevailing Foreign Trade Policy (FTP) of India.
The RBI said both the legs of a merchanting transaction (purchase of goods by Indian residents from non-residents and reselling these to another non-resident) should be routed through the same bank authorised to deal in foreign exchange (AD bank).
The bank should verify the documents, such as invoice, packing list, transport documents and insurance documents and satisfy itself about the genuineness of the trade.
The AD bank should ensure one-to-one matching in case of each merchanting and report defaults in any leg by the traders to the RBI on half-yearly basis.
ramkumar.k@thehindu.co.in
Source: Thehindubusinessline
The commencement of merchanting would be the date of shipment / export leg receipt or import leg payment, whichever is first. The completion date would be the date of shipment / export leg receipt or import leg payment, whichever is the last.
Goods involved in merchanting transactions would be the ones that are permitted for exports / imports under the prevailing Foreign Trade Policy (FTP) of India.
The RBI said both the legs of a merchanting transaction (purchase of goods by Indian residents from non-residents and reselling these to another non-resident) should be routed through the same bank authorised to deal in foreign exchange (AD bank).
The bank should verify the documents, such as invoice, packing list, transport documents and insurance documents and satisfy itself about the genuineness of the trade.
The AD bank should ensure one-to-one matching in case of each merchanting and report defaults in any leg by the traders to the RBI on half-yearly basis.
ramkumar.k@thehindu.co.in
Source: Thehindubusinessline
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