The guidelines in lieu of merchanting trade were previously released by the Reserve Bank of India (RBI) in the year 2003. With some revisions and provisions, RBI has again released the guidelines on merchanting yesterday.
As net foreign exchange inflows result on account of merchanting, RBI has allowed the provision of short-term credit for both the import and export leg of the trade (purchase of goods by the resident and resale to NRI resident). Simultaneously, time period for completion of the merchanting trade activity has also been revised from the stipulated six months to nine months.
For accounting the merchanting trade time, shipment date/ import leg receipt or export leg receipt (whichever is earlier) shall be deemed as commencement while for the trade to be considered as completed date of shipment or import or export leg receipt which is later shall be considered.
Also, foreign exchange outlay shall not be allowed beyond 4 months time. In order to confirm genuineness of the trade, bank should verify all such trade-related documents; including packing list, insurance documents, transport documents and invoices among others.
For better tracking of merchanting trading by the authorities, AD bank has been prescribed to report outstanding merchanting trade on half-yearly basis and report any defaults to the RBI conecerning either of the arm of the trade.