Interest on Delayed Payment of Royalty

[kalyanaraman Venkatraman]

Hi,

Whether Interest is permissible for delayed payment of Royalty to the foreign collaborator? if yes what is the maximum rate of interest permissible?. Please provide the relevant provisions also.

Whether the interest rate applicable to trade credit (LIBOR+3.50%) is applicable only for Goods and not applicable to import of services. whether this argument is correct?

Thanks

AI Summary

Clarification on interest rates for delayed royalty payments: AD Category - I banks can permit at trade credit rate (LIBOR+3.50%). A query was raised regarding the permissibility and maximum rate of interest for delayed royalty payments to a foreign collaborator, and whether the interest rate applicable to trade credit (LIBOR+3.50%) applies to services imports. The response clarifies that AD Category - I banks may permit interest payments on overdue usance bills for less than three years at the prescribed trade credit rate. For pre-payment of usance import bills, remittances should account for interest reductions based on the claimed rate or the prevailing LIBOR. If interest is not specified, the deduction should be based on the currency's LIBOR rate.