The existing foreign exchange regulations allow authorised dealers (banks) to use foreign currency deposits for extending foreign currency trade loan facility to exporters and importers. These regulations, however, allow settlement of such loans against exports only through the realisation of export proceeds or remittances from abroad.
In cases where export proceeds were not realised for any reason including non-performance of export contracts or circumstances, leading to the cancellation of export contracts after partial performance etc., such loans remained unsettled. Resultantly, authorised dealers were constrained to retain the above foreign exchange liabilities on their books of accounts.
In order to address these difficulties and to facilitate exporters/authorised dealers, the State Bank has relaxed the existing policy regarding the settlement of outstanding loans against exports by delegating powers to authorised dealers to settle outstanding export loans valuing up to $50,000/- (or equivalent in other foreign currencies) themselves through interbank market. The settlement of outstanding loans exceeding the abovementioned limit shall, however, require a prior approval of the State Bank.
