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of <h1>Merchanting trade: short-term suppliers' and buyers' credit prohibited; import liability must be extinguished by export payment, transaction within six months</h1> RBI clarifies that short-term credit in the form of suppliers' or buyers' credit, as previously permitted, is not available for merchanting (intermediary) trade transactions, thereby prohibiting authorised dealers from extending such finance for merchanting trades. Authorised dealers undertaking bona fide merchanting transactions must ensure that (a) the import leg liability is extinguished by payment received for the export leg without any delay, and (b) the entire merchanting transaction is completed within six months, thereby imposing compliance and timing obligations on authorised dealers and their constituents.
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