Executive Summary:
This circular from the Reserve Bank of India, dated December 4, 2020, delegates more powers to Authorised Dealer Category I (AD) banks to enhance ease of doing business related to external trade facilitation. It covers direct dispatch of shipping documents, write-off of unrealized export bills, set-off of export receivables against import payables, and refund of export proceeds. The circular is effective immediately.
Key Points / Main Content:
* **Direct Dispatch of Shipping Documents:**
* The USD 1 million limit per export shipment for direct dispatch of shipping documents is removed.
* AD banks can regularize direct dispatch irrespective of export shipment value, provided export proceeds are realized (except for write-offs), the exporter is a regular customer for at least six months, the exporter's account complies with KYC/AML guidelines, and the AD bank is satisfied with the transaction's bonafides.
* **Write-off of Unrealized Export Bills:**
* Revised limits for self-write-off by exporters and write-off by AD banks are introduced, subject to conditions.
* Self-write-off limits: 5% of total export proceeds for non-status holders and 10% for status holders.
* Write-off by AD Category I Bank: 10%.
* Conditions include the amount being outstanding for over a year, satisfactory evidence of efforts to realize proceeds, KYC/AML compliance, and the case falling under specific categories (e.g., buyer insolvency).
* AD banks can write off unrealized bills without limit for cases involving buyer insolvency, intervention by Indian Embassy/Foreign Chamber of Commerce, or goods auctioned/destroyed by authorities, provided sufficient documentation is presented.
* Write-off is permitted for directly dispatched documents under specific conditions.
* Exporters must surrender proportionate export incentives.
* A Chartered Accountant certificate is required for self-write-offs.
* Exports to countries with externalization problems and cases under investigation are ineligible for write-off.
* AD banks must report write-offs in EDPMS and conduct random checks.
* Requests not covered may be referred to the Reserve Bank.
* **Set-off of Export Receivables Against Import Payables:**
* AD banks can allow set-off of export receivables against import payables, including with overseas group/associate companies, subject to conditions.
* Conditions include operationalization through one AD bank, satisfaction with transaction bonafides, no KYC/AML concerns, compliance with Foreign Trade Policy, exclusion of ACU countries, and adherence to specific rules regarding goods/services.
* Set-off should occur within the same calendar year, be supported by verifiable agreements, and not result in tax evasion.
* Each transaction must be reported separately in FETER/EDPMS/IDPMS.
* **Refund of Export Proceeds:**
* AD banks can consider refund requests for re-imported goods due to poor quality.
* Re-import of goods is not mandatory if the goods were auctioned or destroyed by authorities, provided satisfactory evidence is submitted.
* AD banks should exercise due diligence, verify transaction bonafides, and obtain a certificate from DGFT/Customs regarding export incentives.
Impact Analysis:
* **Authorised Dealer Category I Banks (AD Banks):**
* Impact: Greater autonomy and responsibility in facilitating external trade transactions, including direct dispatch of documents, write-offs, set-offs, and refunds.
* Action Required: Update internal policies and procedures to align with the new guidelines, ensure compliance with reporting requirements, and inform constituents about the changes.
* **Exporters:**
* Impact: Simplified procedures for direct dispatch of shipping documents, increased flexibility in write-off of unrealized export bills, and the ability to set off export receivables against import payables.
* Action Required: Understand the revised guidelines and comply with the conditions for availing the facilities, including providing necessary documentation and surrendering export incentives where applicable.
* **Importers:**
* Impact: Opportunity to set off import payables against export receivables, potentially improving cash flow and reducing transaction costs.
* Action Required: Collaborate with exporters and AD banks to implement set-off arrangements in compliance with the guidelines.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking sector and managing the country's monetary policy.
Authorised Dealer Category I banks: Banks authorized by the Reserve Bank of India to deal in foreign exchange.
Foreign Exchange Management Act, 1999: An Act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for matters connected therewith or incidental thereto.
Export Data Processing and Monitoring System: A system used by banks in India to report export transactions and monitor export performance.
KYC AML guidelines: Know Your Customer and Anti-Money Laundering guidelines issued by the Reserve Bank of India to prevent financial crimes.
Directorate of Revenue Intelligence: An Indian intelligence agency responsible for combating smuggling and tax evasion.
Central Bureau of Investigation: The premier investigating police agency in India.
Directorate of Enforcement: A law enforcement agency and economic intelligence agency responsible for enforcing economic laws and fighting economic crime in India.
भारतीय �रज़व र् बक�
RESERVE BANK OF INDIA
www.rbi.org.in
RBI/2020-21/77
A.P. (DIR Series) Circular No. 08 December 04, 2020
To,
All Category - I Authorised Dealer Banks
Madam / Sir,
External Trade – Facilitation - Export of Goods and Services
Please refer to the Statement on Development and Regulatory Polices announced as part of
Bi-monthly Monetary Policy Statement dated December 4, 2020. With a view to further
enhance the ease of doing business and quicken the approval process, it has been decided to
delegate more powers to the Authorised Dealer Category – I banks (AD banks) in the following
areas:
1. Direct Dispatch of Shipping Documents
1.1 In terms of Paragraph 2 of A. P. (DIR Series) Circular No. 6 dated August 13, 2008, AD
banks have been allowed to regularise cases of dispatch of shipping documents by the
exporter direct to the consignee or his agent resident in the country of the final destination of
goods, up to USD 1 million or its equivalent per export shipment.
1.2 With a view to simplify the procedure, it has been decided to do away with the limit of USD
1 million per export shipment.
1.3 Accordingly, AD banks may regularize such direct dispatch of shipping documents
irrespective of the value of export shipment, subject to following conditions:
a) The export proceeds have been realized in full except for the amount written off, if
any, in accordance with the extant provisions for write off.
b) The exporter is a regular customer of AD bank for a period of at least six months.
c) The exporter’s account with the AD bank is fully compliant with Reserve Bank’s
extant KYC / AML guidelines.
d) The AD bank is satisfied about the bonafides of the transaction.
2. “Write-off” of unrealized Export bills
2.1 Attention is invited to A.P. (DIR. Series) Circular No. 88 dated March 12, 2013 on “write-
off” of unrealized export bills. To provide greater flexibility to the AD banks and to reduce
the time taken for according such approvals, the extant procedure is revised as under:Particulars Limit Limit (%) In relation to
Self-write-off by an exporter 5% Total export proceeds
(Other than the Status Holder Exporter) realized during the
calendar year preceding
Self-write-off by Status Holder 10%
the year in which the
Exporter
write-off is being done
Write-off by AD Category-1 Bank 10%
2.2 The above limits of self-write-off and write-off by the AD bank shall be reckoned
cumulatively and shall be available subject to the following conditions:
a) The relevant amount has remained outstanding for more than one year;
b) Satisfactory documentary evidence is furnished indicating that the exporter had made
all efforts to realise the export proceeds;
c) The exporter is a regular customer of the bank for a period of at least 6 months, is fully
compliant with KYC/AML guidelines and AD Bank is satisfied with the bonafides of the
transaction.
d) The case falls under any of the undernoted categories:
i) The overseas buyer has been declared insolvent and a certificate from the official
liquidator, indicating that there is no possibility of recovery of export proceeds, has
been produced.
ii) The unrealized amount represents the balance due in a case settled through the
intervention of the Indian Embassy, Foreign Chamber of Commerce or similar
Organization;
iii) The goods exported have been auctioned or destroyed by the Port / Customs /
Health authorities in the importing country;
iv) The overseas buyer is not traceable over a reasonably long period of time.
v) The unrealized amount represents the undrawn balance of an export bill (not
exceeding 10% of the invoice value) remaining outstanding that turned out to be
unrealizable despite all efforts made by the exporter;
vi) The cost of resorting to legal action would be disproportionate to the unrealized
amount of the export bill or where the exporter even after winning the Court case
against the overseas buyer could not execute the Court decree due to reasons beyond
his control;
vii) Bills were drawn for the difference between the letter of credit value and actual
export value or between the provisional and the actual freight charges but the amounts
have remained unrealized consequent to dishonor of the bills by the overseas buyer
with no prospects of realization.
2.3 Notwithstanding anything contained in para 2.1 and 2.2 above, the AD bank may, on
request of the exporter, write-off unrealised export bills without any limit in respect of cases
falling under any of the categories specified at 2.2 (d) (i), (ii) and (iii) above provided AD bank
is satisfied with the documentary evidence produced.2.4 AD banks may also permit write-off of outstanding amount of export bills up to the specified
ceilings indicated in para 2.1 above, where the documents have been directly dispatched by
the exporter to the consignee or his agent resident in the country of final destination of goods if
the case falls under any of the categories specified at 2.2 (d) (i), (ii) and (iii) above.
2.5 The AD bank shall ensure that the exporter seeking write-off has submitted documentary
evidence towards surrendering of proportionate export incentives, if any, availed of in respect
of the relative export bill.
2.6 In case of self-write off, the AD bank shall obtain from the exporter, a certificate from
Chartered Accountant indicating the export realization in the preceding calendar year and
details of the amount of write-off, if any, already availed of during the current calendar year
along with the requisite details of the EDF/Export Bill under the write-off request. The
certificate shall also indicate that the export incentives, if any, availed by the exporter have
been surrendered.
2.7 The following cases, however, would not qualify for the “write-off” facility:
a. Exports made to countries with externalization problem i.e. where the overseas buyer
has deposited the value of export in local currency but the amount has not been
allowed to be repatriated by the Central Bank authorities of the country concerned.
b. EDF/Softex which are under investigation by agencies like, Enforcement Directorate,
Directorate of Revenue Intelligence, Central Bureau of Investigation, etc. as also the
outstanding bills which are subject matter of civil / criminal suit.
2.8 AD banks shall report write-off of export bills in Export Data Processing and Monitoring
System (EDPMS).
2.9 AD banks shall put in place a system to carry out random check / percentage check of the
export bills so written-off by their internal Inspectors/Auditors (including external Auditors).
2.10 Requests of write-off not covered under the above instructions may be referred to the
Regional Office concerned of the Reserve Bank.
3. Set-off of Export receivables against Import payables
3.1 Presently, AD banks are allowing exporters/importers to set-off their outstanding export
receivables against outstanding import payables from/to the same overseas buyer/supplier.
The Bank has been receiving requests from AD banks, on behalf of their Importer/Exporter
constituents, for allowing such set-off with their overseas group/associate companies either on
net basis or gross basis, through an in-house or outsourced centralised settlement
arrangement.
3.2 Accordingly, it has been decided to delegate powers to AD banks to also consider such
requests of set-off, and the revised guidelines, in supersession of the instructions contained in
circular A.P. (DIR Series) Circular No 47 dated November 17, 2011, are issued as under:The AD bank may allow set-off of outstanding export receivables against outstanding import
payables, subject to the following conditions:
a) The arrangement shall be operationalized/supervised through/by one AD bank only
b) AD bank is satisfied with the bonafides of the transactions and ensures that there are
no KYC/AML/CFT concerns;
c) The invoices under the transaction are not under investigation by Directorate of
Enforcement/Central Bureau of Investigation or any other investigative agency;
d) Import/export of goods/services has been undertaken as per the extant Foreign Trade
policy
e) The export / import transactions with ACU countries are kept outside the arrangement;
f) Set-off of export receivables against goods shall not be allowed against import
payables for services and vice versa.
g) AD bank shall ensure that import payables/export receivables are outstanding at the
time of allowing set-off. Further, set-off shall be allowed between the export and import
legs taking place during the same calendar year.
h) In case of bilateral settlement, the set-off shall be in respect of same overseas
buyer/supplier subject to it being supported by verifiable agreement/mutual consent.
i) In case of settlement within the group/associates companies, the arrangement shall be
backed by a written, legally enforceable agreement/contract. AD bank shall ensure
that the terms of agreement are strictly adhered to;
j) Set-off shall not result in tax evasion/avoidance by any of the entities involved in such
arrangement.
k) Third party guidelines shall be adhered to by the concerned entities, wherever
applicable;
l) AD bank shall ensure compliance with all the regulatory requirement relating to the
transactions;
m) AD bank may seek Auditors/CA certificate wherever felt necessary.
n) Each of the export and import transaction shall be reported separately (gross basis) in
FETERS/EDPMS/IDPMS, as applicable
o) AD bank to settle the transaction in E/IDPMS by utilizing the ‘set-off indicator’ and
mentioning the details of shipping bills/bill of entry/invoice details being settled in the
remark column (including details of entities involved)
4. Refund of Export Proceeds
4.1 Attention is invited to A. P. (DIR Series) Circular No.37 dated April 05, 2007, in terms of
which AD banks, through whom the export proceeds were originally realised, were allowed to
consider requests for refund of export proceeds of goods exported from India and being re-
imported into India on account of poor quality.
4.2 There have been instances when re-importing of goods has not been possible as the
exported goods had reportedly been auctioned or destroyed in the importing country.4.3 The instructions have been reviewed and henceforth AD banks, while permitting refund of
export proceeds of goods exported from India, shall:
(i) Exercise due diligence on the track record of the exporter;
(ii) Verify the bona-fides of the transaction/s;
(iii) Obtain from the exporter a certificate issued by DGFT / Custom authorities that no
export incentive has been availed of by the exporter against the relevant export or the
proportionate export incentives availed, if any, have been surrendered;
(iv) Not insist on the requirement of re-import of goods, where exported goods have been
auctioned or destroyed by the Port / Customs / Health authorities/ any other accredited
agency in the importing country subject to submission of satisfactory documentary
evidence.
4.4 In all other cases AD banks shall ensure that procedures as applicable to normal imports
are adhered to and that an undertaking from the exporter, to re-import the goods within three
months from the date of refund of export proceeds, shall be obtained.
5. AD banks may bring the contents of this Circular to the notice of their constituents
concerned. The Master Direction No 16/2015 dated January 01, 2016 is being updated to
reflect the above changes.
6. The directions contained in this Circular have been issued under Section 10(4) and 11(1) of
Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to
permissions / approvals, if any, required under any other law.
Yours faithfully,
(Ajay Kumar Misra)
Chief General Manager in Charge