Regional Director Dr Sathyan David Reserve Bank of India - RBI Jaipur and Team conduct First Time Ever workshop cum interactive session on ForEx Management at Bhilwara on 26 Aug 2013 in which Mewar Chamber of Commerce officials, Importers & Exporters, Charted Accountants & Company Secretaries, officials from Lead Banks, Vice Chancellor along with a team of MBA Faculty from Sangam University actively participated in the proceedings. Sri CD Srinivasan Chief General Manager from RBI Mumbai conducted the FEMA session including Derivatives with Clinical Precision. Ms Sunanda Batra from RBI Jaipur proposed vote of thanks and Sri ML Meena from RBI Jaipur anchored the proceedings.
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
Reserve Bank of India - RBI ForEx Workshop at Bhilwara - Topic Trade Regulations & Development
1. ACTIVITIES - RBI
POLICY OBJECTIVE:
To be in conformity with the policy of GoI as stipulated in FTP
(5 yearly) – to change with change in policy directions in FTP.
PROCESS OBJECTIVES:
i) Dealing with references received from ADs/Trade Bodies/
/ companies/individuals seeking clearance from FEMA
angle for various trade payments;
ii) Working on Progressive delegation of powers to ROs/ADs
in regard to eligible trade payments;
iii) Effecting Further liberalization/ rationalization to
evolve revised/more exporter/importer – friendly
procedures.
2. FOREIGN EXCHANGE
TRANSACTIONS
As per FEMA, 1999 reg. 2 (e)
“Capital account transaction" means a transaction which
alters the assets or liabilities, including contingent
liabilities, outside India of persons resident in India or
assets or liabilities in India of persons resident outside
India, and includes transactions referred to in sub-
section (3) of section 6;
We are partially convertible on Capital A/c
Current account transactions are those which are
not covered under the above definition. Affect P & L
Account & is governed by Foreign Exchange
Management (Current Account Transactions), Rules -
FEMCAT. Fully convertible since 1994.
3. CURRENT ACCOUNT
TRANSACTIONS
As per GOI Notification GSI 381(E)
dated May 3, 2000
Schedules I / II / III
Complete prohibition on drawing forex
for some transactions
Specific restrictions on drawing forex for
specified transactions
4. CURRENT A/C TRANSACTIONS CONT..
Complete prohibition on Remittance on
Schedule I items
Prior approval of GOI for Schedule II items
Monetary limits fixed for Schedule III
items
Schedule III items- in case of excess
requirement, decision taken by RBI
Periodical review of Schedule III items by
RBI
5. SCHEDULE I
Remittance out of lottery /racing/riding
Remittance for lottery /proscribed
magazines/football polls/sweepstakes
Agency commission on exports to JV/WOS
Agency commission on exports under state
credit except 10% on tea / tobacco
Dividend for companies subject to dividend
balancing
Remittance related to call back telephone
services
Interest earned in NRSR Account
6. SCHEDULE II
Cultural tours – HRD Ministry
Freight Vessel Chartered by PSU – Surface
transport ministry
Import payment by PSU / Dept – surface t m
Advertisement in foreign print media – MOF
Hiring charges of transporders by TV Channels –
I & B Ministry
Hiring charges of transporders by ISP – IT
Ministry
Royalty in excess of 5% (local sales), 8% (exports)
or in excess of USD 2 mn under technical
collaboration – MOC
Membership of P & I Club – MOF (Insurance)
7. SCHEDULE III
Gift exceeding USD 5000 per remitter /donor per
annum
BTQ exceeding USD 10000 / 25000 in a cal. year
Donations exceeding USD 5000 per remitter /
donor per annum
In excess of USD 100 000 for emigration
In excess of USD 100 000 for employment
In excess of USD 100 000 / hospital estimate
which ever is higher for treatment abroad
In excess of USD I mio for consultancy procured
In excess of USD 100 000 by way of
reimbursement of pre-incorporation expenses
11. EXPORT REGULATIONS
Policies & Procedures – DGFT
AD to conduct export transactions in
conformity with Foreign Trade Policy;
DGFT procedures, RBI directions
FEMA Notification 23 of May 3, 2000
Issue of AP(DIR ) Circular whenever it
is needed
Master Circular to ADs every year
1st
of July for ease of operations of all
with up-dation on real time basis
12. DECLARATION FORMS
Exemption up-to USD 25000.
Onus of realisation remains
No form prescribed for service exporters
– Onus of realisation remains
GR / PP/ Softex
Customs/STPI/RBI
Deep Sea fishing-Transfer of catch –
certification of GR is by Master of
vessels.
13. DOCUMENTS DISPATCH
To the AD named in the declaration form
Within 21 days
Goods below INR 25000
Direct Dispatch by SEZ units / Status
holders
Direct Dispatch to Consignee in case of 100%
advance or LC etc
AD can dispatch to overseas consignee if AD
is satisfied with track record and realisation
14. REALISATION & REPATRIATION
Export bills to be realised and repatriated
within 180 days (regulation 9 of FEMA 23)
now 9 months till 30.9.2013
RBI can prescribe time period
SEZ Units- 12 months review after a year
Status Holder/ 100% EOU/ EHTP and BTP
units– 12 months
Warehouses with RBI permission – 15 month
Software exporters to repatriate 100% of
“offsite” contracts.
Software exporters to repatriate only net
profit in case of onsite overseas contracts
15. REALISATION & REPATRIATION…
CONTD
Extension of time – AD/RBI
Largely delegated to AD no monetary
limit – track record is determining factor
AD can grant for 6 months at a time
If Outstanding is in excess of 10% of
average export realisation of last 3 years-
RBI
Cases under investigation – RBI
Legal Cases / Externalisation Problem –
up-to 5 years
16. SOME ISSUES
Export Claim – what is it?
AD can allow – subject to surrender of export
incentives
Exporter should not be on caution list of RBI
Trade Discount – can be allowed by AD prior to
realisation only if the discount has been declared
on form at shipment time and certified by
Customs
Refund of export proceeds – provided goods have
been re-imported
Refund allowed only by the AD through whom
proceeds were realised; incentives to be first
surrendered
17. SELF WRITE-OFF OF EXPORT
PROCEEDS
Why?
Subject to surrender of proportionate export
incentives
Self write off of only outstanding export bills subject
to
(a) bills written off do not exceed 5%(Non-status)
or10%(Status holder) of proceeds due during the
financial year
(b) Should not be under investigation
Exporters dealing with more than one AD can avail of
facility through each AD / if under consortium then
aggregate should not exceed 5% or 10% of proceeds.
Statement furnishing Self Write off including
reduction in invoice value to be submitted to RBI –
provided value written off / extended does not exceed
5% or 10% of amount of export proceeds realized
during the previous calendar year.
18. WRITE OFF…CONTD
Can be written off only by AD who had
handled relevant export bills
AD can allow write-off if satisfied with track
record /bona-fides/efforts made etc
Amount should be outstanding for more than
one year
Amount written off should not be more than
10% of export proceeds realised through
concerned AD during previous calendar year
Surrender of incentives may not be insisted
upon provided it is not a self write off and a
certificate is obtained from INDIAN mission
No write-off in case of externalisation issue
19. WRITE OFF….CONTD
Exporter has to submit documentary proof of
efforts made for realisation
Overseas buyer declared insolvent / bankrupt –
proof of same to be furnished
Overseas buyer not traceable over sufficiently
long period of time
Goods exported have been destroyed by
Port/Customs/Health authorities
Legal avenue is costlier than goods or is non
enforceable
Case not under investigation / no criminal or
pending Civil suit
Exporter not under investigation of any law
enforcement agency
20. NETTING OFF
AD can allow SEZ units to net-off , all others to
come to RBI
Only bilateral netting – same buyer / seller
To be done as on the date of balance sheet of
Indian entity
Transaction with ACU countries to be kept out of
this arrangement
Both set of transaction to be reported separately
in R-returns
Set-off on a one to one basis is allowed now by
ADs for goods i.e., import payables against export
receivables and for services on case to case basis
by RBI FED
21. AGENCY COMMISSION
To be declared on shipment declaration forms
No limit – test of reasonableness
In case not declared but to be paid – AD to be
satisfied with written contract / undertaking
Relative shipment should have taken place
Prohibited in case of exports under Re-Credit
route except 10% for tea-tobacco
Prohibited on exports made towards equity
participation on overseas Jt venture / WOS
Commission payable in trade thru escrow
mechanism provided not to escrow account
holder and not by reduction from invoice
value
22. EXPORT ADVANCE
Can be received freely ( maximum int- LIBOR + 100
b.p.) [London Interbank Offered Rate]
Exports to be completed within one year from date of
receipt of advance normally. As special cases, now it
can be effected after one year provided the
manufacturing cycle requires more time – ship,
boiler, heavy machine
If full / partial amount is being returned prior to one
year, AD can allow it
If amount to be retained after one year for
completing exports – RBI/AD permission
Export transaction to be undertaken thru AD where
advance has been received
Regulation 16 of FEMA 23
Advance to be monitored by A.D.
23. FOREIGN CURRENCY ACCOUNTS
EEFC – now 100% for all conversion 2nd
m
Diamond Dollar Account – 2yr & Rs.3cr
Foreign Currency Collection Account
SEZ unit can have a f.c.a. with an AD in
India subject to conditions of FEMA 63 of
June 21, 2002
Indian entity with overseas branch /
office/rep can have f.c.a. abroad (FEMA 47)
Temporary f.c.a. for exhibitions etc abroad
(FEMA 10)
24. OFFICE ABROAD
Indian entity can set up branch/office/rep abroad
Bank account can be opened abroad for such
offices
AD may allow remittance up to 15 of the average
annual sales/income or turnover during the last
two financial years or up to twenty-five per cent
of the net worth, whichever is higher for initial
/recurring expenses
AD can allow remittance of 10% of average
annual sales/turnover during last 2 yrs for
recurring expenses
Amount can be used for acquiring property for
purpose of business /residential staff of such
overseas office
25. SPECIFIC EXPORT TRANSACTIONS
Export of goods on lease / hire purchase basis requires
RBI prior permission
Export on elongated credit terms requires RBI prior
permission
Counter trade- Prior RBI approval
Export of Books on Consignment basis – AD’s can allow
elongated credit terms up-to 360 days.
Project & Service exports – to follow guidelines
stipulated in Project Export Manual
SEZ Units can undertake job work abroad & export
goods from that country itself – conditions
DTA units can buy goods/services from SEZ units in
forex
26. ECGC CLAIMS
Export Credit & Guarantee Corporation
Insures exporters against potential loss
Documentary proof of settlement from
ECGC
Once ECGC claim is settled, AD should
write off the bill and delete the same from
XOS
Such write off not restricted to 10% limit
Surrender of incentives will be as per FTP
Settlement of ECGC not construed as
realisation in foreign exchange
28. IMPORT PROCEDURES
AD to ensure adherence to normal banking
practices & UCPDC guidelines
Compliance with Research & Development
Cess Act, 1986 to be ensured while importing
drawing & designs
AD to ensure compliance with IT Act where
applicable
AD to ensure compliance with KYC norms
A-I form to be used for imports in excess of
USD 5000
29. OBLIGATION ON PURCHASER
Forex can be used only for the purpose
furnished by buyer- Secn 10 (5) of FEMA
Evidence of Import of goods to be furnished
to AD
Payment for import of goods can be made by
credit to NR account of seller maintained in
India
Remittances against Imports to be normally
completed within 180 days from date of
shipment
Remittances against import of books to be
allowed without any time restriction
30. DELAYED IMPORT PAYMENT
Can be allowed by AD’s
Payment of interest on overdue import bills for
period up-to 3 years as per provisions of trade
credit
In case of pre-payment of usance import bills,
remittances may be made only after reducing
the proportionate interest for the unexpired
portion of usance at the rate at which interest
has been claimed or LIBOR of the currency in
which the goods have been invoiced, whichever is
applicable.
Where interest is not separately claimed or
expressly indicated, remittances may be allowed
after deducting the proportionate interest for the
unexpired portion of usance at the prevailing
LIBOR of the currency of invoice.
31. ADVANCE REMITTANCE FOR
IMPORT
Advance for import can be sent freely up-
to USD 200,000.
If advance remittance exceeds USD
200,000 an unconditional, irrevocable
standby LC or bank guarantee from an
international bank of repute situated
outside India or a guarantee of an AD
bank in India, if such a guarantee is
issued against the counter-guarantee of
an international bank of repute situated
outside India.
32. ADVANCE..CONTD..
In cases where the AD is satisfied about
the track record of the importer, the
requirement of BG/ LC may not be
insisted upon for advance remittances up-
to USD 5,000,000 (five mio)
AD banks to frame their own internal
guidelines to deal with such cases as per
policy framed by the bank's Board of
Directors.
A PSU or a Department/Undertaking of
the Central/State Govt needs to obtain a
specific waiver for BG from the MoF
before making advance remittance
exceeding USD 100, 000.
33. ADVANCE REMITTANCE…CONTD
Remittance is made directly to the supplier or
manufacturer of the goods and not to any third
party or to a numbered account.
Physical import of goods into India is made
within six months (three years in case of capital
goods) from the date of remittance and the
importer gives an undertaking to furnish
documentary evidence of import within fifteen
days from the close of the relevant period.
In the event of non-import of goods, AD to ensure
that the amount is repatriated to India or is
utilised for any other purposes for which release
of exchange is permissible.
34. EVIDENCE OF IMPORT
In case of all imports, where value of import
exceeds USD 100,000 it is obligatory on the AD
through whom the relative remittance was made,
to ensure that the importer submits -
The Exchange Control copy of the Bill of Entry
for home consumption, or
The Exchange Control copy of the Bill of Entry
for warehousing, in case of 100% Export Oriented
Units or
Customs Assessment Certificate or Postal
Appraisal Form where import has been made by
post, as evidence that the goods have actually
been imported into India.
Where imports are made in non-physical form,
i.e., software or data through internet/datacom
channels and drawings and designs through
e-mail/fax, a certificate from a CA.
35. IMPORT EVIDENCE
E C copy of BoE for h c or a certificate from the
CEO or auditor of the company that the goods have
been imported into India if :-
the amount remitted is less than USD 1,000,000(mio)
importer is a company listed on a stock exchange in
India and whose net worth is not less than Rs.100
crores as on the date of its last audited balance sheet,
or
the importer is a public sector company or an
undertaking of the Government of India or its
departments.
The above facility is also available to autonomous
bodies, including scientific bodies/academic
institutions, such as Indian Institute of Science /
Indian Institute of Technology, etc. whose accounts
are audited by the Comptroller and Auditor General
of India (CAG).
AD banks may insist on a declaration from the
auditor/CEO of such institutions that their accounts
are audited by CAG.
36. IMPORT EVIDENCE..CONTD…
AD need not follow up submission of
evidence of import involving amount of
USD 100,000 or less provided they are
satisfied about the genuineness of the
transaction and the bona-fides of the
remitter.
A suitable policy to be framed by the
bank's Board of Directors
AD to set their own internal guidelines to
deal with such cases.
37. RECEIPT OF IMPORT DOCUMENTS
Import bills and documents should be received
from the banker of the supplier by the AD of the
importer in India.
AD should not make remittances where import
bills have been received directly by the importers
from overseas supplier, except in the following
cases:
1. Where the value of import bill does not exceed
USD 300,000.
2. Import bills received by wholly-owned Indian
subsidiaries of foreign companies from their
principals.
3. Import bills received by Status Holder Exporters,
100% EOU / Units in Free Trade Zones, PSU.
4. Import bills received by all limited companies viz.
public limited, deemed public limited and private
limited companies.
38. DIRECT RECEIPT OF DOCUMENTS
AD may receive bills direct from the
overseas supplier provided the AD bank is
fully satisfied about the financial
standing/status and track record of the
importer customer.
AD bank should obtain report on each
individual overseas supplier from the
overseas banker or reputed credit agency
before extending this facility.
Requirement of obtaining credit report in
case of direct receipt of import documents
by AD banks has been done away with for
imports up-to USD 100 000.
39. IMPORT OF GOLD/PLATINUM/SILVER BY
NOMINATED BANKS/AGENCIES
Why RBI deals with it?
Who decides about nominated agencies
DBOD decided about banks – specific set of
prudential guidelines in such cases
Gold may be imported by nominated
agencies/banks on consignment basis only to be
utilized by exporters of jewellery where the
ownership remains with supplier and the
importer (consignee) acts as agent of the supplier
(consignor). For others LCs - 100% cash margin
and the documents on DP basis.
Remittances towards the cost of import shall be
made as and when sales take place in terms of
the agreement entered into between them.
40. IMPORT OF GOLD/PLATINUM/SILVER
BY NOMINATED BANKS/AGENCIES …
CONTD
Import of gold on unfixed price basis
-nominated agency/bank may import gold
on outright purchase basis subject to the
condition that although ownership of the
gold shall be passed on to the importer at
the time of import itself, the price of gold
shall be fixed later, as and when the
importer sells the gold to the users.
Instructions also apply to import of
platinum and silver.
41. DIRECT IMPORT OF GOLD
AD banks can open Letters of Credit and allow
remittances on behalf of EOUs, units in SEZs in the
Gem & Jewellery sector and nominated agencies, for
direct import of gold, subject to:
Import of gold should be in accordance with the
Foreign Trade Policy.
Suppliers’/Buyers’ Credit or Credit in any other
form are not allowed for import of gold in any
form for domestic consumption.
Usance period of LCs opened for direct import of gold,
should not exceed 90 days and backed by 100% cash.
Adherence to Know-Your-Customer (KYC) norms and
the Anti-Money-Laundering
AD to closely monitor such transactions. Any large or
abnormal increase in the volume of business of the
importer should be closely examined to ensure that
the transactions are bonafide trade transactions.
42. DIRECT IMPORT OF GOLD …CONTD
In addition to carrying out the normal due
diligence exercise, the credentials of the supplier
should also be ascertained before opening the
LCs.
The financial standing, line of business and the
net worth of the importer customer should be
commensurate with the volume of business
turnover.
All documents pertaining to such transactions
must be preserved for at least five years.
AD banks should follow up submission of the Bill
of Entry by the importers
Head Offices/International Banking Divisions, of
AD banks undertaking gold import transactions
are required to submit as per prescribed format
to Trade Division
43. MERCHANT TRADE
What is Merchant Trade?
Indian entity should take necessary
precautions in handling merchant trade
transactions or intermediary trade
transactions to ensure that
(a) Goods involved in the transactions are
permitted to be imported into India,
(b) Such transactions do not involve foreign
exchange outlay for a period exceeding three
months
(c) All rules, regulations and directions
applicable to export (except Export
Declaration Form) and import (except Bill of
Entry) are complied with for the export leg
and import leg, respectively, of the merchant
trade transactions.
(d) Payment is received in time for the export
leg.
44. MERCHANT TRADE…CONTD
Short-term credit either by way of suppliers'
credit or buyers‘ credit is not available for
merchanting trade or intermediary trade
transactions.
PCFC export finance not available for merchant
trade transactions
The terms of payment for the import leg and the
export leg of the transactions are such that the
liability for the import leg of the transaction is
extinguished by the payment received for the export
leg of the transaction, without any delay and trade
transaction is completed within a period of 6
months.
Why???
Can payment for import leg be made first?
45. RECEIPT OF PAYMENT
Regulated by FEMA 14 of 3rd
May 2000
Can be received in any permitted currency
Permitted currency is a foreign currency
which is freely convertible
Payment shall be received in a currency
appropriate to the final destination of
goods-irrespective of country of residence
of buyer
Through Banking Channel
ACU countries– through ACU mechanism
46. CONTD…
By debit to FCNR / NRE account of buyer
maintained in Inida
In INR from Credit Card servicing bank in India
against charge slip
From Re account of an Exchange house with an
AD provided it does not exceed INR 2 lakhs per
export transaction
In the form of bank draft/pay order/ cheque
/foreign currency notes / travelers cheques from
buyer during his visit to India provided it is
surrendered to AD of exporter within specified
period
Nepal & Bhutan in INR – Export proceeds(!)
48. PROPOSED SYSTEM
Due to the huge volume of the data coupled with errors of data entry at multiple
places, it has been observed that the large number of transactions remain
unmatched one to one.
With a view to removing the bottlenecks in this exercise, as per the
recommendations of a Working Group, a revised / revamped procedure of data
capturing, transfer and follow up has been decided to be implemented. The
objectives of the proposed system are:
To harmonize the data fields received in GR/SDF/PP/Softex form and
substitute the various formats with a new format to be called Export
Declaration Form (EDF) to be used by all exporters irrespective of the fact
that the items for export are goods or software or if the export is done
through non-EDI enabled port
To automate the data receiving /processing/ maintaining of export data
received from custom/STPI/SEZs in a secure manner.
To organize export data received by RBI from all channels AD bank-wise and
to push the data on selected items/fields, relevant for export follow-up
purposes, to the Nodal Offices of the AD banks from the Dedicated RBI
Server.
To authorise AD banks uploading/updating receipt of document and receipt of
export proceeds for transactions pertaining to them, in the RBI system.
To provide for reporting of serious cases of default including forwarding to the
Customs & DoE for necessary action, if any.
50. TECHNICAL COMMITTEE ON
SERVICES/FACILITIES TO
EXPORTERS
Given the current global and Indian scenario and
the importance of export sector in the overall
context, the Reserve Bank of India has constituted a
technical committee to examine issues relating to
difficulties being faced by exporters with regard to
availability of credit, transaction costs, insurance
and factoring and other procedural hassles in their
dealings with banks and financial institutions.
The decision to set up such a committee was
announced by the Governor, Dr. D. Subbarao in his
meeting with bankers post Third Quarter Review of
the Monetary Policy 2012-13 on January 29, 2013.
51. TECHNICAL COMMITTEE
The Committee is chaired by Executive Director,
Shri. G. Padmanabhan with representation from
EXIM Bank, ECGC, select banks, trade bodies,
such as, Federation of Indian Export
Organisation (FlEO), Indian Banks’ Association
(IBA) and Foreign Exchange Dealers Association
of India (FEDAI). Senior officers from DBOD,
FED and DEPR from the Reserve Bank will also
be represented on the Committee.
The Committee has submitted its
recommendations on April 29, 2013.
The recommendations are at various stages of
implementation by various agencies.
52. OTHER MAJOR DEVELOPMENTS
Realization period for Export proceeds – 9m
till September 30, 2013
Term of realization of export proceeds by SEZ
units – 12 months
“Set-off” of export receivables against import
payables may now be allowed by any AD
Export of Goods – acceptance of Forwarder’s
Cargo Receipt
Simplification and revision of Softex
Procedure
Exchange Earner's Foreign Currency (EEFC)
Account – 100% credit
53. OTHER MAJOR DEVELOPMENTS
Supply of Goods and Services by SEZs to DTA
Unit – paid in forex
Write off made simpler basing on realization
Import of gold coins & medallion by
banks/Nominated Agencies/Entities prohibited
Import of Gold in any form under 20:80
discipline, linked to export per consignment.
Imported Gold for domestic use only on DP
basis, credit not allowed.
Import of gold in any form including jewellery
made of gold/precious metals or / and studded
with diamonds / semi precious / precious stones
– LC for 90 days.
54. OTHER MAJOR DEVELOPMENTS
Release of Foreign Exchange for Imports
– Liberalisation - Form A 1 –USD5000
Online Payment Gateway System
Provider – limit enhanced to USD10,000
Border Haats at Indo-Bangla border at
two places in Meghalaya – hassle free
trade for local entrepreneurs/small
producers
Export Monitoring – Web based solution
Technical Committee – sea change in
trade facilitation
Use of National Currency in intnl. trade
55. . RBI is an easily accessible organization
Objective is to further economic growth
Open to suggestions
Welcome changes with time
www.rbi.org.in
pkkar@rbi.org.in
Thank You for