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April 2012

A.P. (DIR Series) Circular No. 83, dated 27-2-2012 — Import of gold on loan basis — Tenor of loan and opening of stand-by letter of credit.

By Gaurang Gandhi, Chartered Accountant
Reading Time 1 mins
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Presently, the maximum tenor of gold loan, as per the Foreign Trade Policy 2004-2009 of the Government of India, is 240 days — 60 days for manufacture and exports +180 days for fixing the price and repayment of gold loan.
The Foreign Trade Policy 2009-2014 of the Government of India has increased the period of completion for export from 60 days to 90 days. As a result, the maximum tenor of gold loan is increased from 240 days to 270 days — 90 days for manufacture and exports +180 days for fixing the price and repayment of gold loan.

Further, this Circular requires banks to see that:

(i) Maximum period of gold loan must be as per the Foreign Trade Policy 2009-14 or as notified by the Government of India from time to time.

(ii) Tenor of stand-by letter of credit, for import of gold on loan basis, wherever required, must also be in line with the tenor of gold loan.

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