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Q 374: What are banking rules and regulations regarding foreign exchange for exports?
A: 1. Since export deals with foreign exchange, the transaction is subject to Rules & Regulations framed by the Government of India/RBI.
2. The Foreign Exchange Management Act 1999 (FEMA) is the relevant enactment.
3. You are requested to refer FED Master Direction No. 16/2015-16 Dated 1st January, 2016, regarding Export of Goods and Services, for better understanding of this subject.
4. The exporter will be liable to realise and repatriate export proceeds.
5. 3rd party payment is allowed subject to the following:
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A |
Firm irrevocable order backed by a tripartite agreement. |
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B |
Bank should be satisfied with the bonafides of the transaction. |
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C |
Bank should consider the Financial Action Task Force – FATF - country. |
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D |
Third party payment should be routed through banking channel only.
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E |
The exporter should declare the third party remittance in the Export Declaration Form / Shipping Bill. |
6. EEFC Account facility is available to exporters for 100% amount. An exporter may open EEFC Account with a bank in India. It will be non-interest bearing current account. No credit facilities shall be permitted. The sum total of the accruals in the account during a calendar month should be converted into rupees on or before the last day of the succeeding calendar month.
7. Where an exporter receives an advance payment from the overseas buyer, he will be under an obligation to export the goods within 1 year. The documents covering the shipment are routed through the bank through whom the advance payment is received. If exporter is unable to ship the goods within said 1 year, no remittance towards refund of unutilised portion of advance payment shall be made after the expiry of 1 year, without the prior approval of the RBI.
8. EDPMS is a platform to monitor the forex. The Shipping Bill data in EDPMS is captured from Customs/EDI. The detail of forex realised for exports is reported by the bank. Any outstanding payment beyond permissible time limit is reflected in this system. All the overdue export advances will reflect into the system. Exporters would be caution listed based on EDPMS data. Details of all export outstanding bills can be obtained by the exporter from the EDPMS through its bank.
9. If after a bill has been negotiated or sent for collection, its amount is to be reduced for any reason, bank may approve such reduction if satisfied about genuineness of the request, provided:
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A |
The reduction does not exceed 25% of invoice value. |
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B |
It does not relate to export of commodities subject to floor price. |
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C |
The exporter is not on the exporters’ caution list of the RBI. |
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D |
The exporter has to surrender proportionate export incentives. |
For exporters who have been in the export business for more than 3 years, reduction in invoice value may be allowed, without any percentage ceiling, subject to the above conditions. The exporter’s track record should be satisfactory, i.e. the exports outstanding do not exceed 5% of the average annual export realisation during the preceding 3 financial years.
10. Prior approval of the RBI is not required if, after goods have been shipped, they are to be transferred to a buyer other than the original buyer in the event of default by the latter, provided the reduction in value, if any, involved does not exceed 25% of the invoice value, and the realisation of export proceeds is not delayed beyond the period of 9 months from the date of export.
11. As per Circular No. 37 dated 20.11.2014, the period of realisation and repatriation of export proceeds shall be 9 months from the date of export for all exporters.
12. The RBI has permitted banks to extend the period of realisation of export proceeds up to 6 months at a time irrespective of the invoice value of the export, subject to the following conditions:
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A |
The export transactions covered by the invoices are not under investigation by ED/CBI or other investigating agencies. |
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B |
The bank is satisfied that the exporter has not been able to realise export proceeds for reasons beyond his control. |
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C |
The exporter submits a declaration that the export proceeds will be realised during the extended period. |