What changed
The limit for advance remittances requiring an unconditional, irrevocable standby LC or bank guarantee has been increased from USD 100,000 to USD 200,000. This applies to importers other than public sector companies or government departments/undertakings, which still need a Ministry of Finance waiver for amounts exceeding USD 100,000. All other existing instructions, including the waiver facility for remittances up to USD 5,000,000 based on the bank's Board-approved policy, remain unchanged.
What it means for you
Banks can now process advance remittances up to USD 200,000 without demanding a standby LC or bank guarantee, reducing paperwork and costs for importers. This liberalisation may increase the volume of smaller import transactions, but banks must still apply their internal risk assessment for larger amounts. Public sector importers remain subject to stricter oversight, requiring explicit government waiver for any advance remittance above USD 100,000.
What you must do
- Update internal policies and systems to reflect the new USD 200,000 threshold for mandatory bank guarantee on advance import remittances.
- Communicate the revised limit to all relevant branches and trade finance teams to ensure consistent application.
- Continue to apply the existing waiver facility for remittances up to USD 5,000,000 based on Board-approved policy and importer track record.
- For public sector importers, strictly enforce the requirement of Ministry of Finance waiver for any advance remittance exceeding USD 100,000.
Who it affects
AD Category-I banks handling import remittances, Importers (non-public sector) making advance payments for goods, Public sector companies and government departments/undertakings importing goods
Does this circular apply to all importers?
No, it applies to importers other than public sector companies or government departments/undertakings. For those entities, the earlier limit of USD 100,000 remains, and a Ministry of Finance waiver is required for any advance remittance exceeding that amount.
What happens if an importer wants to remit more than USD 200,000 in advance?
For amounts above USD 200,000, the existing requirements from earlier circulars apply: an unconditional, irrevocable standby LC or bank guarantee is needed, unless the bank waives it under its Board-approved policy for amounts up to USD 5,000,000 based on the importer's track record.
Are there any other changes to the advance remittance rules?
No, only the threshold for mandatory bank guarantee has been raised. All other instructions, including the waiver facility for up to USD 5,000,000, remain unchanged as per A.P. (DIR Series) Circular No. 09 dated August 21, 2008.