QA Series 08 - Exports Part 5

 

The Banking Tutor

Question Answer Series 2025

S No 08                                                                    15-06-2025

Exports – Part 05 

101. What are guidelines for opening Opening / hiring of warehouses abroad ? 

AD may permit Exporter for opening / hiring Warehouse abroad subject to following: 

Applicant’s export outstanding does not exceed 5 per cent of exports made during the previous financial year. 

Applicant has a minimum export turnover of USD 100,000/- during the last financial year. 

The above permission may be granted to the exporters initially for a period of one year and renewal may be considered later. 

Exception - AD banks may allow Opening/hiring of a warehouse in ‘Bharat Mart’ by an Indian exporter with a valid Importer Exporter Code, without any pre-conditions, after verifying the reasonableness of the same. 

102. Can AD Bank allow reduction in invoice value on account of prepayment of usance bills ? 

AD banks may allow cash discount to the extent of amount of proportionate interest on the unexpired period of usance, calculated at the rate of interest stipulated in the export contract or at the prime rate/LIBOR/ any other widely accepted / Alternative reference rate of the currency of invoice where rate of interest is not stipulated in the contract.

103. Can AD Bank allow reduction in invoice value after a bill has been negotiated or sent for collection ? 

In above cases, AD bank may approve such reduction, if satisfied about genuineness of the request, provided: 

a) The reduction does not exceed 25% of invoice value. However, in the case of exporters who have been in the export business for more than three years, reduction in invoice value may be allowed, without any percentage ceiling, subject to the above conditions as also subject to their track record being satisfactory. 

b) It does not relate to export of commodities subject to floor price stipulations. 

c) The exporter is not on the exporters’ caution list of the Reserve Bank, 

d) The exporter is advised to surrender proportionate export incentives availed of, if any. 

104. What is meant by satisfactory track record ? 

the export outstanding do not exceed 5 per cent of the average annual export realization during the preceding three financial years. 

105. What are the guidelines related to Change of buyer/consignee ? 

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, AD may allow the same  without prior approval of the RBI provided the reduction in value, if any, involved does not exceed 25 % of the invoice value and the realization of export proceeds is not delayed beyond the period of 9 months from the date of export. 

106. Can AD Bank permit extension of time for realization of export proceeds? 

RBI has permitted the AD banks to extend the period of realization of export proceeds beyond stipulated period of realization from the date of export, up to a period of six months, at a time, irrespective of the invoice value of the export subject to the following conditions: 

a) The export transactions covered by the invoices are not under investigation by Directorate of Enforcement / Central Bureau of Investigation or other investigating agencies, 

b) The AD Category – I bank is satisfied that the exporter has not been able to realise export proceeds for reasons beyond his control, 

c) The exporter submits a declaration that the export proceeds will be realised during the extended period, 

d) While considering extension beyond one year from the date of export, the total outstanding of the exporter does not exceed USD one million or 10 per cent of the average export realizations during the preceding three financial years, whichever is higher. 

e) In cases where the exporter has filed suits abroad against the buyer, extension may be granted irrespective of the amount involved / outstanding. 

f) Cases which are not covered by the above instructions would require prior approval from the concerned Regional Office of the Reserve Bank. 

g) Reporting should be done in EDPMS. 

107. How AD Bank deal with cases involving  Set-off of export receivables against import payables? 

AD banks may deal with requests received from their Exporter/Importer constituents for allowing set-off of outstanding export receivables against outstanding import payables: 

a. The arrangement shall be operationalised/supervised through/by one AD Category – I bank only 

b. The invoices under the transaction are not under investigation by Directorate of Enforcement/Central Bureau of Investigation or any other investigative agency; 

c. The export / import transactions with ACU countries are kept outside the arrangement; 

d. Set-off of export receivables against goods shall not be allowed against import payables for services and vice versa. 

e. AD Category – I bank shall ensure that import payables/export receivables are outstanding at the time of allowing set-off. 

f. Set-off shall be allowed between the export and import legs taking place during the same calendar year. 

g. 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. 

h. In case of settlement within the group/associates companies, the arrangement shall be backed by a legally enforceable agreement/contract. 

i. Set-off shall not result in tax evasion/avoidance by any of the entities involved in such arrangement.

108.  What are the guidelines for  Netting-off of export receivables against import payments – Units in Special Economic Zones (SEZs) ? 

AD banks may allow requests received from exporters for ‘netting off’ of export receivables against import payments for units located in Special Economic Zones subject to the following: 

(a) The netting off of export receivables against import payments is in respect of the same Indian entity and the overseas buyer / supplier (bilateral netting) and the netting may be done as on the date of balance sheet of the unit in SEZ. 

(b) Both the transactions of sale and purchase in R- Returns under FETERS are reported separately. 

(c) The export / import transactions with ACU countries are kept outside the arrangement. 

109. How to handle shipping documents in respect of caution listed exporters ? 

When caution listed exporters submit shipping documents for negotiation / purchase/ discount/ collection, etc. the AD bank may accept the documents subject to following conditions:- 

(a) The exporters concerned should produce evidence of having received advance payment or an irrevocable letter of credit in their favour covering the full value of the proposed exports; 

(b) In case of usance bills, the relative letter of credit should cover full export value and also permit such drawings. Besides, the usance bills should also mature within prescribed realisation period reckoned from date of shipment. 

Except under the above mentioned conditions  AD banks should not handle the shipping documents of caution listed exporters. 

110. What are the guidelines related to Issue of  Guarantee by AD Bank on behalf of caution-listed exporters ? 

AD banks should obtain prior approval of the Reserve Bank for issuing guarantees for caution-listed exporters. 

111. What are the guidelines related to issue of Bank Realisation Certificates (BRC) by AD ? 

AD banks are required to update the EDPMS with data of export proceeds on “as and when realised basis” and they are required to generate Electronic Bank Realisation Certificate (eBRC) only from the data available in EDPMS, to ensure consistency of data in EDPMS and consolidated eBRC. 

112. What are the guidelines related to Agency commission on exports ? 

AD banks may allow payment of commission, either by remittance or by deduction from invoice value, on application submitted by the exporter. The remittance on agency commission may be allowed subject to conditions as under: 

a) Amount of commission has been declared on EDF/SOFTEX form and accepted by the Customs authorities or Ministry of Information Technology, Government of India / EPZ authorities as the case may be. 

b)  In cases where the commission has not been declared on EDF/SOFTEX form, remittance may be allowed after satisfying the reasons adduced by the exporter for not declaring commission on Export Declaration Form, provided a valid agreement/written understanding between the exporters and/or beneficiary for payment of commission exists. 

c) The relative shipment has already been made. 

113. What are the guidelines related to refund of export proceeds ? 

AD banks, through whom the export proceeds were originally realised may consider requests for refund of export proceeds of goods exported from India and being reimported into India on account of poor quality. 

While permitting such transactions, AD Category – I banks shall: 

(a) Obtain from the exporter a certificate issued by DGFT / Custom authorities that no export incentive has been availed by the exporter against the relevant export or the proportionate incentives availed, if any, have been surrendered; 

(b) 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. 

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. 

@@@ 

(Source : RBI MD updated 23^rd April, 2025) 

(With this Issue QA related to Exports completed) 

Next Topic – Legal matters -  will be shared on 17^th  June 2025.

Sekhar Pariti

+91 9440641014