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.

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.

CURRENT ACCOUNT TRANSACTIONS

As per GOI Notification GSI 381(E) dated May 3, 2000

Schedules I / II / IIIComplete prohibition on drawing forex

for some transactionsSpecific restrictions on drawing forex

for specified transactions

CURRENT A/C TRANSACTIONS CONT..

Complete prohibition on Remittance on Schedule I items

Prior approval of GOI for Schedule II itemsMonetary limits fixed for Schedule III

itemsSchedule III items- in case of excess

requirement, decision taken by RBIPeriodical review of Schedule III items by

RBI

SCHEDULE I

Remittance out of lottery /racing/ridingRemittance for lottery /proscribed

magazines/football polls/sweepstakesAgency commission on exports to

JV/WOSAgency commission on exports under

state credit except 10% on tea / tobaccoDividend for companies subject to

dividend balancingRemittance related to call back

telephone servicesInterest earned in NRSR Account

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)

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

SHARED RESPONSIBILITIES

MOC-DGFT

DOR-CustomsReserve Bank

FOREIGN TRADE

Regulated by DGFTForeign Trade PolicyFTP is a 5 year policy with annual

reviewPhysical Verification – Goods -CustomsSoftware Exports - STPIProcedures - RBIPayment Mechanism - RBI

TRADE REGULATIONS

Regulations Operative Directives

ACT

Notifications

EXPORT REGULATIONS

Policies & Procedures – DGFTAD 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 neededMaster Circular to ADs every year

1st of July for ease of operations of all with up-dation on real time basis

DECLARATION FORMSExemption up-to USD 25000. Onus of realisation remainsNo form prescribed for service

exporters – Onus of realisation remains

GR / PP/ SoftexCustoms/STPI/RBIDeep Sea fishing-Transfer of catch –

certification of GR is by Master of vessels.

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

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

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

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

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.

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

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

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

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

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.

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)

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

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

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

IMPORTS OF GOODS & SERVICES

Regulated by DGFTForeign Trade PolicyPhysical Verification –Customs

Procedures - RBIPayment Mechanism - RBI

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

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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.

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?

RECEIPT OF PAYMENT

Regulated by FEMA 14 of 3rd May 2000Can be received in any permitted

currencyPermitted currency is a foreign currency

which is freely convertiblePayment 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

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(!)

WORKING GROUP ON EXPORT REPORTING & FOLLOW-UP

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.

PROPOSED SYSTEM CONT..

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.

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.

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

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.

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

. 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 listening