S.No

Contents

Part I

Introduction

Part II

General guidelines for imports

1

General Guidelines

2

Form A-1

3

Import Licenses

4

Obligation of Purchaser of Foreign Exchange

5(a)

Time limit for normal imports

5(b)

Time limit for deferred payment arrangements

5(c)

Time limit for import of books

6

Import of Foreign exchange / Indian Rupees

6 (a)

Import of Indian currency and currency notes

6 (b)

Import of foreign exchange into India

PART III

Operational Guidelines for Imports

B. Advance Remittance

1

Advance Remittance for import of goods

2

Advance Remittance for Import of Rough Diamonds

3

Advance Remittance for Import of Aircrafts/Helicopters and other Aviation Related purchases

4

Interest on Import Bills

5

Remittances against Replacement  Imports

6

Guarantee for Replacement Import

7

Import of Equipment by Business Process Outsourcing (BPO) Companies for their overseas sites

8

Receipt of Import Bills/Documents

8(a)

Receipt of import documents by the importer directly from overseas suppliers

8(b)

Receipt of import documents by the importer directly from overseas suppliers in case of specified sectors

8(c)

Receipt of import documents by the AD Category – I bank directly from overseas suppliers

9

Evidence of Import

9(a)

Physical Imports

9(b)

Evidence of import in lieu of Bill of Entry

9(c)

Non Physical Imports

10

Issue of acknowledgement

11

Verification and Preservation

12

Follow up for Import Evidence

13

Issue of Bank Guarantee

14

Import of Gold / Platinum / Silver by Nominated Banks / Agencies

14(a)

Import on consignment basis

14(b)

Import on unfixed price basis

15

Direct Import of Gold

16

Gold Loans

17

Import factoring

18

Merchanting Trade

PART IV

Annex-1

Annex -2

Annex-3

Annex- 4

Annex-5

PART V

APPENDIX

Introduction

(1) Import trade is regulated by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce & Industry, Department of Commerce, Government of India. Authorised Dealer Category – I (AD Category – I) banks should ensure that the imports into India are in conformity with the Foreign Trade Policy in force and Foreign Exchange Management (Current Account Transactions) Rules, 2000 framed by Government of India vide Notification No. G.S.R.381 (E) dated May 3, 2000 and the Directions issued by Reserve Bank under Foreign Exchange Management Act, 1999 from time to time.
(2) AD Category – I banks should follow normal banking procedures and adhere to the provisions of Uniform Customs and Practices for Documentary Credits (UCPDC), etc. while opening letters of credit for import into India on behalf of their constituents.
(3) Compliance with the provisions of Research & Development Cess Act, 1986 may be ensured for import of drawings and designs.
(4) AD Category – I banks may also advise importers to ensure compliance with the provisions of Income Tax Act, wherever applicable.

Part II

General guidelines for imports

1. General Guidelines

Rules and regulations from the foreign exchange angle to be followed by the AD Category – I banks while undertaking import payment transactions on behalf of their clients are set out in the following paragraphs. Where specific regulations do not exist, AD Category – I banks may be governed by normal trade practices. AD Category – I banks may particularly note to adhere to "Know Your Customer" (KYC) guidelines issued by Reserve Bank (Department of Banking Operations & Development) in all their dealings.

2. Form A-1

Applications by persons, firms and companies for making payments, exceeding USD 500 or its equivalent, towards imports into India must be made in Form A-1.

3. Import Licenses

Except for goods included in the negative list which require licence under the Foreign Trade Policy in force, AD Category - I banks may freely open letters of credit and allow remittances for import. While opening letters of credit, the ‘For Exchange Control purposes’ copy of the licence should be called for and special conditions, if any, attached to such licences should be adhered to. After effecting remittances under the licence, AD Category - I banks may preserve the copies till they are verified by the internal auditors or inspectors.

4. Obligation of Purchaser of Foreign Exchange

i) In terms of Section 10(6) of the Foreign Exchange Management Act, 1999 (FEMA), any person acquiring foreign exchange is permitted to use it either for the purpose mentioned in the declaration made by him to an Authorised Dealer bank under Section 10(5) of the Act or to use it for any other purpose for which acquisition of foreign exchange is permissible under the said Act, or Rules or Regulations framed there under.
ii) Where foreign exchange acquired has been utilised for import of goods into India, the AD Category – I bank should ensure that the importer furnishes evidence of import viz., Exchange Control copy of the Bill of Entry, Postal Appraisal Form or Customs Assessment Certificate, etc., and satisfy himself that goods equivalent to the value of remittance have been imported.
iii) In addition to the permitted methods of payment for imports laid down in Notification No.FEMA14/2000-RB dated 3rd May 2000, payment for import can also be made by way of credit to non-resident account of the overseas exporter maintained with a bank in India. In such cases also AD Category – I banks should ensure compliance with the instructions contained in sub-paragraphs (i) and (ii) above.

5.

Time Limit for Settlement of Import Payments

5 a. Time limit for normal imports

(i) In terms of the extant regulations, remittances against imports should be completed not later than six months from the date of shipment, except in cases where amounts are withheld towards guarantee of performance, etc.
(ii) AD Category – I banks may permit settlement of import dues delayed due to disputes, financial difficulties, etc. Interest in respect of such delayed payments may be permitted in terms of the directions in para 4 of Part III below.

5 b. Time limit for deferred payment arrangements

Deferred payment arrangements, including suppliers and buyers credit, providing for payments beyond a period of six months from date of shipment up to a period of less than three years, are treated as trade credits for which the procedural guidelines laid down in the Master Circular for External Commercial Borrowings and Trade Credits may be followed.

5 c. Time limit for import of books

Remittances against import of books may be allowed without restriction as to time limit, provided, interest payment, if any, is as per the instructions in para 4 of Part III below.

6. Import of Foreign exchange / Indian Rupees

(i) Except as otherwise provided in the Regulations, no person shall, without the general or special permission of the Reserve Bank, import or bring into India, any foreign currency. Import of foreign currency, including cheques, is governed by clause (g) of sub-section (3) of Section 6 of the Foreign Exchange Management Act, 1999, and the Foreign Exchange Management (Export and Import of Currency) Regulations  2000, made by Reserve Bank vide Notification No. FEMA 6/RB- 2000 dated May 3, 2000 as amended from time to time.
(ii) Reserve Bank may allow a person to bring into India currency notes of Government of India and / or of Reserve Bank subject to such terms and conditions as the Reserve Bank may stipulate.

6 a. Import of Indian currency and currency notes

(i) Any person resident in India who had gone out of India on a temporary visit, may bring into India at the time of his return from any place outside India (other than from Nepal and Bhutan), currency notes of Government of India and  Reserve Bank notes up to an amount not exceeding Rs.5,000/- per person.
(ii) A person may bring into India from Nepal or Bhutan, currency notes of Government of India and Reserve Bank notes other than notes of denominations of above Rs.100 in either case.

6 b. Import of foreign exchange into India

A person may –
(i) send into India without limit foreign exchange in any form other than currency notes, bank notes and travelers cheques;
(ii) bring into India from any place outside India, without limit foreign exchange (other than unissued notes), which shall be subject to the condition that such person makes, on arrival in India, a declaration to the Custom authorities in Currency Declaration Form (CDF) annexed to these Regulations; provided further that it shall not be necessary to make such declaration where the aggregate value of the foreign exchange in the form of currency notes, bank notes or travelers cheques brought in by such person at any one time  does not exceed USD10,000 (US Dollars ten thousand) or its equivalent and/or the aggregate value of foreign currency notes brought in by such person at any one time does not exceed USD 5,000 (US Dollars five thousand) or its be equivalent.

PART III

Operational Guidelines for Imports

Advance Remittance

1  Advance Remittance for import of goods

(i) AD Category – I bank may allow advance remittance for import of goods without any ceiling subject to the following conditions:
a) If the amount of advance remittance exceeds USD 100,000 or its equivalent, an unconditional, irrevocable standby Letter of Credit or a guarantee from an international bank of repute situated outside India or a guarantee of an AD Category – I bank in India, if such a guarantee is issued against the counter-guarantee of an international bank of repute situated outside India.
b) In cases where the importer (other than a Public Sector Company or a Department/Undertaking of the Government of India/State Governments) is unable to obtain bank guarantee from overseas suppliers and the AD Category – I bank is satisfied about the track record and bonafides of the importer, the requirement of the bank guarantee / standby Letter of Credit may not be insisted upon for advance remittances up to USD 1,000,000 (US dollar one million). AD Category – I banks may frame their own internal guidelines to deal with such cases as per a suitable policy framed by the bank's Board of Directors.
c) A Public Sector Company or a Department/Undertaking of the Government of India / State Government/s which is not in a position to obtain a guarantee from an international bank of repute against an advance payment, is required to obtain a specific waiver for the bank guarantee from the Ministry of Finance, Government of India before making advance remittance exceeding USD 100, 000.

(ii). The remittance is made directly to the supplier or manufacturer of the goods and not to any third party or to a numbered account.

(iii). Physical import of goods into India is made within six months (three years in case of capital goods) from the date of  remittance and the importer gives an undertaking to furnish documentary evidence of import within fifteen days from the close of the relevant period.

(iv). In the event of non-import of goods, AD bank should ensure that the amount of advance remittance is repatriated to India or is utilised for any other purposes for which release of exchange is permissible under the FEMA, Rules or Regulations made there under.

2. Advance Remittance for Import of Rough Diamonds

(i) AD Category – I bank are permitted to allow advance remittance without any limit and without bank guarantee or standby letter of credit, by an importer (other than a Public Sector Company or a Department / Undertaking of the Government of India / State Government/s), for import of rough diamonds into India from the under noted mining companies, viz.
a) Diamond Trading Company Pvt. Ltd., UK,
b) RIO TINTO, UK,
c) BHP Billiton, Australia,
d) ENDIAMA, E. P. Angola,
e) ALROSA, Russia, and
f) GOKHARAN, Russia.
(ii) While allowing the advance remittance, AD bank may ensure the  following:
(a)The importer should be a recognized processor of rough diamonds as per a list to be approved by Gems and Jewellery Export Promotion Council (GJEPC) in this regard and should have a good track record of export realisation;
(b) AD Category – I bank should undertake the transaction based on their commercial judgment and after being satisfied about the bonafides of the transaction;
(c) Advance payments should be made strictly as per the terms of the sale contract and should be made directly to the account of the company concerned, that is, to the ultimate beneficiary and not through numbered accounts or otherwise. Further, due caution may be exercised to ensure that remittance is not permitted for import of conflict diamonds;
(d) KYC and due diligence exercise should be done by the AD Category – I bank for the Indian importer entity and the  overseas company; and
(e) AD Category – I bank should follow up submission of the Bill of Entry / documents evidencing import of rough diamonds into the country by the importer, in terms of FEMA / Rules / Regulations / Directions issued in this regard.

(iii) In case of an importer entity in the Public Sector or a Department / Undertaking of the Government of India / State Government/s, AD Category – I bank may permit advance remittance subject to the above conditions and a specific waiver of bank guarantee from the Ministry of Finance, Government of India where the advance payments is equivalent to or exceeds USD 100,000.

(iv) AD Category – I banks are required to submit a report (Annex-2) of all such advance remittances made without a bank guarantee or standby letter of credit, where the amount of advance payment is equivalent to or exceeds USD 5,000,000, to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Trade Division, Central Office, Amar Bhawan, Sir. P. M. Road, Fort, Mumbai – 400 001, on a half yearly basis, as at the end of September and March every year, in the format annexed (Annex-2).The report should be submitted within 15 days from the close of the respective half year.

3. Advance Remittance for Import of Aircrafts/Helicopters and other Aviation Related purchases

As a sector specific measure, airline companies which have been permitted by the Directorate General of Civil Aviation to operate as a schedule air transport service, can make advance remittance without bank guarantee, up to USD 50 million.  Accordingly, AD Category – I banks may allow advance remittance, without obtaining a bank guarantee or an unconditional, irrevocable standby Letter of Credit, up to USD 50 million, for direct import of each aircraft, helicopter and other aviation related purchases. The remittances for the above transactions shall be subject to the following conditions:

i). The AD Category - I banks should undertake the transactions based on their commercial judgment and after being satisfied about the bonafide of the transactions. KYC and due diligence exercise should be done by the AD Category - I banks for the Indian importer entity and the overseas manufacturer company as well.

ii). Advance payments should be made strictly as per the terms of the sale contract and are made directly to the account of the manufacturer (supplier) concerned.

iii). AD Category - I bank may frame their own internal guidelines to deal with such cases, with the approval of their Board of Directors.

iv). In the case of a Public Sector Company or a Department / Undertaking of Central / State Governments, the AD Category - I bank shall ensure that the requirement of bank guarantee   has   been   specifically waived by the  Ministry of  Finance, Government of India for advance remittances exceeding USD100,000.

v). Physical import of goods into India is made within six months (three years in case of capital goods) from the date of remittance and the importer gives an undertaking to furnish documentary evidence of import within fifteen days from the close of the relevant period. It is clarified that where advance is paid as milestone payments, the date of last remittance made in terms of the contract will be reckoned for the purpose of submission of documentary evidence of  import.

vi). Prior to making the remittance, the AD Category – I bank may ensure that the requisite approval of the Ministry of Civil Aviation / DGCA / other agencies in terms of the extant Foreign Trade Policy has been obtained by the company, for import. 

vii). In the event of non-import of aircraft and aviation sector related products, AD Category - I bank should ensure that the amount of advance remittance is immediately repatriated to India.

Prior approval of the concerned Regional Office of the Reserve Bank will be required in case of any deviation from the above stipulations.

4. Interest on Import Bills

(i) AD – Category – I bank may allow payment of interest on usance bills or overdue interest for a period of less than three years from the date of shipment at the prescribed rates. The current all-in-cost ceilings are as under:

* for the respective currency of credit or applicable benchmark.

(ii) In case of pre-payment of usance import bills, remittances  may be made only after reducing the proportionate interest for the unexpired portion of usance at the rate at which interest has been claimed or LIBOR of the currency in which the goods have been invoiced, whichever is applicable. Where interest is not separately claimed or expressly indicated, remittances may be    allowed after deducting the proportionate interest for the  unexpired portion of usance at the prevailing LIBOR of the  currency of invoice.

5. Remittances against Replacement  Imports

Where goods are short-supplied, damaged, short-landed or lost in transit and the Exchange Control copy of the import licence  has already been utilised to cover the opening of a letter of   credit against the original goods which have been lost, the  original endorsement to the extent of the value of the lost goods may be cancelled by the AD Category – I bank and fresh remittance for replacement imports may be permitted without reference to Reserve Bank, provided the insurance claim relating to the lost goods has been settled in favour of the importer. It may be ensured that the consignment being replaced is shipped within the validity period of the licence.

6. Guarantee for Replacement   Import

In case replacement goods for defective import are being sent by the overseas supplier before the defective goods imported  earlier are reshipped out of India, AD Category – I banks may issue guarantees at the request of importer client for dispatch/return of the defective goods, according to their commercial judgment. 

7. Import of Equipment by Business Process Outsourcing (BPO) Companies for their overseas sites

AD Category – I bank may, allow BPO companies in India to make remittances towards the cost of equipment to be imported and installed at their overseas sites in connection with the setting up of their International Call Centres (ICCs) subject to the following  conditions:
(a) The BPO company should have obtained necessary  approval from the Ministry of Communications and Information  Technology, Government of India and other authorities  concerned for setting up of the ICC.
(b) The remittance should be allowed based on the AD Category  - I banks’ commercial judgment, the bonafides of the  transactions and strictly in terms of the contract. 
(c) The remittance is made directly to the account of the overseas supplier.
(d) The AD Category – I banks should also obtain a certificate as evidence of import from the Chief Executive Officer (CEO) or auditor of the importer company that the goods for which remittance was made have actually been imported and installed at overseas sites.

8.

Receipt of Import Bills/Documents  

8 a. Receipt of import documents by the importer directly from overseas suppliers

Import bills and documents should be received from the banker of the supplier by the banker of the importer in India. AD Category – I bank should not, therefore, make remittances where import bills have been received directly by the importers from the overseas supplier, except in the following cases:
i. Where the value of import bill does not exceed USD 100,000.
ii. Import bills received by wholly-owned Indian subsidiaries of foreign companies from their principals.
iii. Import bills received by Status Holder Exporters as defined in the Foreign Trade Policy, 100% Export Oriented Units / Units in Free Trade Zones, Public Sector Undertakings and Limited Companies.
iv. Import bills received by all limited companies viz. public limited, deemed public limited and private limited companies.

8 b. Receipt of import documents by the importer directly from overseas suppliers in case of specified sectors

As a sector specific measure, AD Category - I banks are permitted to allow remittance for imports up to USD 300,000 where the importer of rough diamonds, rough precious and semi-precious stones has received the import bills / documents directly from the overseas supplier and the documentary evidence for import is submitted by the importer at the time of remittance. AD Category - I banks may undertake such transactions subject to the following conditions :

(i) The import would be subject to the prevailing Foreign Trade Policy.
(ii) The transactions are based on their commercial judgment and they are satisfied about the bonafides of the transactions.
(iii)  AD Category - I banks should do the KYC and due diligence exercise and should be fully satisfied about the financial standing / status and track record of the importer customer. Before extending the facility, they should also obtain a report on each individual overseas supplier from the overseas banker or reputed credit rating agency overseas.

8 c. Receipt of import documents by the AD Category – I bank directly from overseas suppliers

(i) At the request of importer clients, AD Category – I bank may receive bills directly from the overseas supplier as above, provided the AD Category – I bank is fully satisfied about the financial standing/status and track record of the importer customer.
(ii) Before extending the facility, the AD Category – I bank should obtain a report on each individual overseas supplier from the overseas banker or a reputed credit agency. However, such credit report on the overseas supplier need not be obtained in cases where the invoice value does not exceed USD 100,000 provided the AD Category – I bank is satisfied about the  bonafides of the transaction and track record of the importer constituent.

9.

Evidence of Import

9 a.      Physical Imports

(i). In case of all imports, where value of foreign exchange remitted/paid for import into India exceeds USD 100,000 or its equivalent, it is obligatory on the part of the AD Category – I bank through whom the relative remittance was made, to ensure that the importer submits :-
a). The Exchange Control copy of the Bill of Entry for home consumption,
or
b). The Exchange Control copy of the Bill of Entry for warehousing, in case of 100% Export Oriented Units,
or
c). Customs Assessment Certificate or Postal Appraisal Form, as declared by the importer to the Customs Authorities, where import has been made by post, as evidence that the goods for which the payment was made have actually been imported into India.

(ii) In respect of imports on D/A basis, AD Category – I bank should insist on production of evidence of import at the time of effecting remittance of import bill. However, if importers fail to produce documentary evidence due to genuine reasons such as non-arrival of consignment, delay in delivery/customs clearance of consignment, etc., AD bank may, if satisfied with the genuiness of request, allow reasonable time, not exceeding three months from the date of remittance, to the importer to submit the evidence of import.

9 b. Evidence of import in lieu of Bill of Entry

(i) AD Category – I bank may accept, in lieu of Exchange Control copy of Bill of Entry for home consumption, a certificate from the Chief Executive Officer (CEO) or auditor of the company that the goods for which remittance was made have actually been imported into India provided :-
(a) the amount of foreign exchange remitted is less than USD 1,000,000 or its equivalent,
(b) the importer is a company listed on a stock exchange in India and whose net worth is not less than Rs.100 crore as on the date of its last audited balance sheet,
or
the importer is a public sector company or an undertaking of  the Government of India or its departments.
(ii) The above facility may also be extended to autonomous bodies, including scientific bodies/academic institutions, such as Indian Institute of Science / Indian Institute of Technology, etc. whose accounts are audited by the Comptroller and Auditor General of India (CAG). AD Category – I bank may insist on a declaration from the auditor/CEO of such institutions that their accounts are audited by CAG.

9 c. Non Physical Imports

(i) Where imports are made in non-physical form, i.e., software or data through internet / datacom channels and drawings and designs through e-mail/fax, a certificate from a Chartered Accountant that the software / data / drawing/ design has been received by the importer, may be obtained.
(ii) AD Category – I bank should advise importers to keep Customs Authorities informed of the imports made by them under this clause.

10.  Issue of acknowledgement

AD Category – I bank should acknowledge receipt of evidence of import e.g. Exchange Control copy of the Bill of Entry, Postal Appraisal Form or Customs Assessment Certificate, etc., from importers by issuing acknowledgement slips containing all relevant particulars relating to the import transactions.

11   Verification and Preservation

(i) Internal inspectors or auditors (including external auditors appointed by AD Category – I bank) should carry out verification of the documents evidencing import, e.g. Exchange Control copies of Bills of Entry or Postal Appraisal Forms or Customs Assessment Certificates, etc.,
(ii). Documents evidencing import into India should be preserved by AD Category – I bank for a period of one year from the date of its verification. However, in respect of cases which are under investigation by investigating agencies, the documents may be destroyed only after obtaining clearance from the investigating agency concerned.

12 .  Follow up for Import Evidence

(i) In case an importer does not furnish any documentary evidence of import, as required under paragraph 9 of Part III, within 3 months from the date of remittance involving foreign exchange exceeding USD100,000, the AD Category – I bank  should rigorously follow-up for the next 3 months, including issuing registered letters to the importer.
(ii) AD Category – I bank should forward a statement on half-yearly basis as at the end of June & December of every year, in form BEF (Annex 1) furnishing details of import transactions,  exceeding USD 100,000 in respect of which importers have defaulted in submission of appropriate document evidencing import within 6 months from the date of remittance, to the Regional Office of Reserve Bank under whose jurisdiction the AD Category – I bank is functioning, within 15 days from the close of  the half-year to which the statement relates.
(iii) AD Category – I bank need not follow up submission of evidence of import involving amount of USD 100,000 or less provided they are satisfied about the genuineness of the transaction  and the bonafides of the remitter. A suitable policy may be framed by the bank's Board of Directors and AD Category – I bank may set their own internal guidelines to deal with such cases.

13  Issue of Bank Guarantee

AD Category – I banks are permitted to issue guarantee on behalf of their importer customers in terms of Notification No. FEMA 8/2000-RB dated May 3, 2000, as amended from time to time.

14

 Import of Gold / Platinum / Silver by Nominated Banks / Agencies

14 a.  Import on consignment basis

Gold may be imported by the nominated agencies/banks on consignment basis where the ownership will remain with the supplier and the importer (consignee) will be acting as an agent of the supplier (consignor). Remittances towards the cost of import shall be made as and when sales take place and in terms of the provisions of agreement entered into between the overseas supplier and nominated agency/bank. These instructions would also apply to import of platinum and silver.

14 b.  Import on unfixed price basis

The nominated agency/bank may import gold on outright purchase basis subject to the condition that although ownership of the gold shall be passed on to the importer at the time of import itself, the price of gold shall be fixed later, as and when the importer sells the gold to the users. These instructions would also apply to import of platinum and silver.

15. Direct Import of Gold

AD Category – I bank can open Letters of Credit and allow remittances on behalf of EOUs, units in SEZs in the Gem & Jewellery sector and nominated agencies, for direct import of gold, subject to the following
(a) The import of gold should be strictly in accordance with the Foreign Trade Policy.
(b) Suppliers’ and Buyers’ Credit, including the usance period of LCs opened for direct import of gold, should not exceed 90 days.
(c) Banker's prudence should be strictly exercised for all transactions pertaining to import of gold. AD Category – I bank should ensure that due diligence is undertaken and all Know Your Customer (KYC) norms and the Anti-Money-Laundering guidelines, issued by Reserve Bank from time to time are adhered to while undertaking such transactions. AD Category – I bank should closely monitor such transactions. Any large or abnormal increase in the volume of business of the importer should be closely examined to ensure that the transactions are bonafide trade transactions.
(d) In addition to carrying out the normal due diligence exercise, the credentials of the supplier should also be ascertained before opening the LCs. The financial standing, line of business and the net worth of the importer customer should be commensurate with the volume of business turnover. Apart from the above, in case of such transactions banks should also make discreet enquiries from other banks to assess the actual position. Further, in order to establish audit trail of import/export transactions, all documents pertaining to such transactions must be preserved for at least five years.
(e) AD Category – I bank should follow up submission of the Bill of Entry by the importers as stipulated.
(f) Head Offices/International Banking Divisions, of AD Category – I bank undertaking gold import transactions are   required to submit as per the format enclosed at Annex-3, a monthly statement thereof, to the Chief General Manager, Trade Division, Foreign Exchange Department, Amar  Building, Central Office, Reserve Bank of India, Sir P.M. Road, Fort, Mumbai 400001.

16  Gold Loans

(i) Nominated agencies / approved banks can import gold on loan basis for on lending to exporters of jewellery under this scheme.
(ii) EOUs and units in SEZ who are in the Gem and Jewellery sector can import gold on loan basis for manufacturing and export of jewellery on their own account only.
(iii) The maximum tenor of gold loan would be as per the Foreign Trade Policy 2004-2009, or as notified by the Government of India from time to time in this regard.
(iv) AD bank may open Standby Letters of Credit (SBLC), for import of gold on loan basis, where ever required, as per FEDAI guidelines dated April 1, 2003. The tenor of the SBLC should be in line with the tenor of the gold loan.
(v) SBLC can be opened only on behalf of entities permitted to import gold on loan basis, viz. nominated agencies and 100% EOUs/units in SEZ, which are in the Gem and  Jewellery sector.
(vi) SBLC should be in favour of internationally renowned bullion banks only. AD Category – I bank can obtain a detailed list of internationally renowned bullion banks from the Gem &  Jewellery Export Promotion Council.
(vii) All other existing instructions on import of gold and opening of Letters of Credit, with usance period not exceeding 90 days, will continue to be applicable.
(viii) AD Category – I banks must maintain adequate documentation with them to uniquely link all imports with the SBLC issued for the import of gold on loan basis.

17  Import factoring

(i) AD Category – I bank may enter into arrangements with international factoring companies of repute, preferably members of Factors Chain International, without the  approval of Reserve Bank.
(ii) They will have to ensure compliance with the extant foreign exchange directions relating to imports, Foreign Trade Policy in force and any other guidelines/directives issued by Reserve Bank in this regard.

18. Merchanting Trade

AD Category – I bank may take necessary precautions in handling bonafides merchanting trade transactions or intermediary trade transactions to ensure that:

(a) goods involved in the transactions are permitted to be imported into India, all rules, regulations and directions applicable to export (except Export Declaration Form) and import (except Bill of Entry) are complied with for the export leg and import leg, respectively.

(b) The entire merchant trade transaction is completed within a period of 6 months.

(c)The transactions do not involve foreign exchange outlay for a period exceeding three months.

(d) Payment is received in time for the export leg.

(e) Where the payment for export leg of the transaction

precedes the payment for import leg, AD Category – I banks should ensure that the terms of payment are such that the liability for the import leg of the transaction is extinguished by the payment received for the export leg of the transaction, without any delay.

AD Category – I banks may note that short-term credit either by way of suppliers' credit or buyers' credit is not available for merchanting trade or intermediary trade transactions.