Exporters may receive advance payments (with or without interest) from their overseas buyers provided
(a) The shipments are made within one year from the date of receipt or advance payment
(b) The rate of interest, if any payable does not exceed LIBOR + 100 basis points
(c) The documents convering the shipment are routed through the authorised dealer through whom the advance payment is received
Provided that in the event of the exporter's inability to make the shipment partly or fully within one year from the date or receipt of advance payment, no remittance towards refund of unutilized portion of advance payment or towards payment of interest shall be made after the expiry of the said period of one year without the prior approval of the Reserve Bank.
Where the export agreement provides for shipment or goods extending beyond the period of one year from the date of receipt of advance payment the exporter shall require the prior approval of the Reserve Bank of India.
Authoriscd dealers may freely grant preshipment advances against Red clause letters of credit in favour of their exporter-constituents. Advance made by the letter of credit opening hank will, however be treated as advance remittances against exports.