Regulatory Alerts2011-04-11
Added · Updated
Compliance of domestic value addition requirement for back to back letters of credit
Authorized Dealer banks must strictly observe the domestic value addition requirement prescribed in the Import Policy Order notification by the Ministry of Commerce when opening foreign or local back to back letters of credit against export letters of credit. This directive supersedes any earlier instructions regarding domestic value addition found in the Guidelines for Foreign Exchange Transactions-2009, Vol-1, specifically paragraphs 35 and 37 of chapter 7. Banks are advised to remain alert to prevent the opening of such letters of credit for the import or procurement of excess inputs without meeting these requirements, as such actions constitute contraventions of the Foreign Exchange Regulation Act, 1947.
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