RBI caps tenor of trade finance instruments to 1 yr

With the new guidelines coming into force, all the previous circulars stand withdrawn from April 1, 2018, the Financial Markets Regulation Department of the central bank said in the circular.

PTI
Mumbai, Publish Date: Mar 13 2018 1:33AM | Updated Date: Mar 13 2018 1:33AM
RBI caps tenor of trade finance instruments to 1 yrRepresentational Pic

The Reserve Bank today tightened the guidelines for hedging commodity price risks and freight risks in overseas markets, which will come into effect next financial year, by limiting the tenor of all bank instruments in trade finance areas.

Accordingly, a central bank circular said, "banks can issue standby letters of credit (SBLCs)/guarantees, for a maximum period of one year, in lieu of making a remittance of margin money for commodity hedging transactions. Banks should ensure that these SBLCs/guarantees are used by their clients for the intended purposes only".

With the new guidelines coming into force, all the previous circulars stand withdrawn from April 1, 2018, the Financial Markets Regulation Department of the central bank said in the circular. 

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