QA Series 04 - Exports Part 1

 

The Banking Tutor

Question Answer Series 2025

S No 04                                                                    07-06-2025

Exports – Part 01 

01. Who regulates Export of Goods and Services in India ? 

Export trade is regulated by the Directorate General of Foreign Trade (DGFT) and its regional offices, functioning under the Ministry of Commerce and Industry, Department of Commerce, Government of India. Policies and procedures required to be followed for exports from India are announced by the DGFT, from time to time. 

02. In which currency Export contracts and Invoices denominated ? 

All export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realised in freely convertible currency. 

03.  Whose duty it is to get export proceeds realised & repatriated to India ? 

It is obligatory on the part of the exporter to realise and repatriate the full value of goods /software / services to India within a stipulated period from the date of export. 

04. What is the permissible period to get export proceeds realised and repatriated ? 

The period of realization and repatriation of export proceeds shall be nine months from the date of export for all exporters including Units in Special Economic Zones (SEZs), Status Holder Exporters, Export Oriented Units (EOUs), Units in Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) & Bio-Technology Parks (BTPs).  

05. What is the permissible period to get export proceeds realised and repatriated in case of exports made to warehouse abroad ? 

For goods exported to a warehouse established outside India, the proceeds shall be realised within fifteen months from the date of shipment of goods.  

06. What is the permissible period to get export proceeds realised and repatriated in case of exports made to ‘Bharat Mart’ ? 

AD banks may allow exporters to realise and repatriate full export value of goods exported to ‘Bharat Mart’ within nine months from the date of sale of the goods from the warehouse. 

07. What is Bharat Mart? 

The Bharat Mart is India's warehousing facility set up in the United Arab Emirates which would help the Indian exports showcase their products under one roof. This is similar to China's Dragon Mart. 

08. What is the Settlement under ACU Mechanism ? 

Participants in the Asian Clearing Union will have the option to settle their transactions either in ACU Dollar or in ACU Euro or in ACU Japanese Yen. 

09. How the Trade transactions with Myanmar (Burma) be settled ?

Indo-Myanmar Trade - Trade transactions with Myanmar can be settled in any freely convertible currency in addition to the ACU mechanism. 

10. How the Trade transactions with Iran  be settled ? 

In view of the difficulties being experienced by importers/exporters in payments to / receipts from Iran all eligible current account transactions including trade transactions with Iran should be settled in any permitted currency outside the ACU mechanism. 

11. How the Trade transactions with Sri Lanka  be settled ? 

All eligible current account transactions including trade transactions with Sri Lanka may be settled in any permitted currency outside the ACU mechanism. 

12. Whether Operations in ‘ACU Euro’ are allowed ? 

Operations in ‘ACU Euro’ have been temporarily suspended with effect from July 01, 2016. 

13. How the Trade transactions with Maldives  be settled ? 

India’s bilateral trade transactions with Maldives may also be settled in INR  and/or Maldivian Rufiyaa (MVR)  in addition to the ACU mechanism. 

14. Can Third Party payments be allowed in settlement of Exports/ Import transactions ?

Third party payments for export / import transactions are permitted subject to conditions as under: 

a) Firm irrevocable order backed by a tripartite agreement should be in place. However, it may not be insisted upon in cases where documentary evidence for circumstances leading to third party payments / name of the third party being mentioned in the irrevocable order/invoice has been produced. 

b) Third party payment should be routed through the banking channel only; 

c) The exporter should declare the third party remittance in the Export Declaration Form and it would be responsibility of the Exporter to realise and repatriate the export proceeds from such third party named in the EDF; 

d) It would be responsibility of the Exporter to realise and repatriate the export proceeds from such third party named in the EDF; 

e) Reporting of outstanding, if any, would continue to be shown against the name of the exporter. However, instead of the name of the overseas buyer the name of the declared third party should appear in the outstanding report. 

f) In case of shipments being made to a country in Group II of Restricted Cover Countries, (e.g. Sudan, Somalia, etc.), payments for the same may be received from an Open Cover Country; and 

g) In case of imports, the Invoice should contain a narration that the related payment has to be made to the (named) third party, the Bill of Entry should mention the name of the shipper as also the narration that the related payment has to be made to the (named) third party and the importer should comply with the related extant instructions relating to imports including those on advance payment being made for import of goods. 

15. What are the guidelines related to Settlement of Export transactions in currencies not having a direct exchange rate ? 

AD Category-I banks may permit settlement of export transactions  in currencies not having a direct exchange rate subject to following conditions: 

a) Exporter shall be a customer of the AD Bank, 

b) Signed contract / invoice is in a freely convertible currency, 

c) The beneficiary is willing to receive the payment in the currency of beneficiary instead of the original (freely convertible) currency of the invoice/ contract, Letter of Credit as full and final settlement, 

d) AD bank is satisfied with the bona fides of the transactions, and 

e) The counterparty to the exporter/ importer of the AD bank is not from a country or jurisdiction in the updated FATF Public Statement on High Risk & Non Co-operative Jurisdictions on which FATF has called for counter measures.

16. What is the Framework for Cross Border Trade Transactions in INR? 

The broad framework for cross border trade transactions in INR under Foreign Exchange Management Act, 1999 (FEMA) is as described below: 

(a) All exports and imports under this arrangement may be denominated and invoiced in Rupee (INR). 

(b) Exchange rate between the currencies of the two trading partner countries may be market determined. 

(c) The settlement of trade transactions under this arrangement shall take place in INR. For settlement of trade transactions with any country, AD bank in India may open Special Rupee Vostro Accounts of correspondent bank/s of the partner trading country.

(d) Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier. 

(e) Indian exporters undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country. 

e) Indian exporters may receive advance payment against exports from overseas importers in Indian rupees through the above Rupee Payment Mechanism. 

f) ‘Set-off’ of export receivables against import payables in respect of the same overseas buyer and supplier with facility to make/receive payment of the balance of export receivables/import payables, if any, through the Rupee Payment Mechanism may be allowed. 

g) Issue of Bank Guarantee for trade transactions, undertaken through this arrangement, is permitted subject conditions specified. 

h) The Rupee surplus balance held may be used for permissible capital and current account transactions in accordance with mutual agreement. 

17. How the balance in Special Vostro Accounts can be used ? 

 The balance in Special Vostro Accounts can be used for:

 

(a) Payments for projects and investments.

 

(b) Export/Import advance flow management

 

(c) Investment in Government Treasury Bills, Government securities, etc. 

Foreign Currency Account 

18. Whether participants in International Trade fairs can open FC Account abroad? 

Participants in international exhibition/trade fair have been granted general permission for opening a temporary foreign currency account abroad, provided that the balance in the account is repatriated to India through normal banking channels within a period of one month from the date of closure of the exhibition/trade fair. 

19.  Can an Indian entity open a FC Account in the name of it’s overseas branch? 

An Indian entity can open a foreign currency account with a bank outside India, in the name of its overseas office/branch, by making remittance for the purpose of normal business operations of the said office/branch or representative. 

20. Can a unit in SEZ open a FC Account in India ? 

A unit located in a Special Economic Zone (SEZ) may open a Foreign Currency Account with an AD Category – I bank in India. 

21. Can a Resident Project/Service exporter open a FC account abroad ? 

A person resident in India being a project / service exporter may open, hold and maintain foreign currency account with a bank outside or in India, subject to the standard terms and conditions in the Memorandum PEM. 

22. What is PEM in  Memorandum PEM? 

Regulations relating to Project Exports and Service Exports are laid down in the Project Exports Manual (“PEM”) issued by RBI. PEM refers to Project Exports Manual (of RBI) 

23. For what purposes funds in FC Accounts abroad of Indian exporter can be utilised ? 

Funds in FC account abroad may be utilised by the exporter for paying for its imports into India or repatriated into India within a period not exceeding the end of the next month from the date of receipt of the funds after adjusting for forward commitments. 

Diamond Dollar Account (DDA) 

24. Who can open DDA ? 

Firms dealing in purchase / sale of rough or cut and polished diamonds etc. with a track record of at least 2 years in import / export of diamonds etc. and having an average annual turnover of Rs. 3 crores or above during the preceding three licensing years (licensing year is from April to March) are permitted to transact their business through Diamond Dollar Accounts. 

25. How many DDAs can one Firm open ? 

Any Firm is allowed to open maximum five Diamond Dollar Accounts with their banks. 

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

Next Issue  will be shared on 9^th  June 2025.

Sekhar Pariti

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