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Banking/RBI Regulations


Frequently Asked Question (FAQ)
Banking/RBI Regulations

Question: We like to know can we sell goods in hard currency to Europe and USA for payment to be received in 360 days from the date of bill of lading. If not, what is the maximum period of credit allowed for which goods can be sold from the date of bill of lading?
The period of realization of exports proceeds for all categories EOU’s/SEZ’s /Status holders (Export House, Star Export House, Trading House, Star Trading) is 270 days from the date of exports.
 
Question: We have exported in a foreign currency which does not appear in the list of customs. How can we calculate the foreign exchange received for discharging our export obligation?

In such cases, total realised value in rupee as mentioned by bank in the eBRC should be converted into USD by using the USD or INR exchange rate prevailing on the date of realisation as published by customs through notification.

Question: Can we offset the payment receivable from importer towards consultancy to be paid to him?

You are permitted to capitalise the payments due from the foreign entity towards exports, fees, royalties or any other dues from the foreign entity for supply of technical know-how, consultancy, managerial and other services within the ceilings applicable. Capitalisation of export proceeds remaining unrealised beyond the prescribed period of realisation will require prior approval of the Reserve Bank of India.

Question: We are participating in a B2C exhibition in China retail sale is allowed. How we will bring the money from the products sold during the exhibition abroad?

Participants in international exhibitions and trade fairs have been granted general permission vide regulation 7(7) of the Foreign Exchange Management (Foreign Currency Account by a Person Resident in India) Regulations, 2000 for opening a temporary foreign currency account abroad. You may deposit the foreign exchange obtained by sale of goods at the international exhibitions and trade fairs and operate the account during your  stay outside India 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 exhibitions and trade fair and full details are submitted to the concerned banks.

Question: What are eligibility criteria to become status holder?

 

Foreign Trade Policy 2009-14 Foreign Trade Policy 2015-20
Status  Export Performance FOB/FOR value (in Rupee Crores) Status Category Export Performance FOB/FOR (as converted) Value in US$ Million
Export House (EH) 20 One Star Export House 3
Star Export House (SHE) 100 Two Star Export House 25
Trading House (TH) 500 Three Star Export House 100
Star Trading House (STH) 2500 Four Star Export House 500
Premier Trading House (PTH) 7500 Five Star Export House 2000

 

Question: We are not a Status holder exporter. Can we send documents directly to the buyer?

No. Banks will send the documents to overseas branches/ correspondents. However, they may dispatch shipping documents direct to the consignees or their agents resident in the country of final destination of goods in cases where

i) Advance payment or an irrevocable letter of credit has been received for the full value of the export shipment and the underlying sale contract or letter of credit provides for dispatch of documents direct to the consignee or his agent resident in the country of final destination of goods.

ii) The banks may also accede to the request of the exporter provided the exporter is a regular customer and the bank is satisfied, on the basis of standing and track record of the exporter and arrangements have been made for realisation of export proceeds. 

Question: What are the new conditions under which Star Trading Houses / Premier Trading Houses (STH/PTH) registered as nominated agencies by the Director General of Foreign Trade (DGFT) can now import gold?

The STH/PTH which were allowed to import gold under 20:80 scheme now stands withdrawn. This would be also be applicable to restrictions on gold import  for Nominated Banks /Agencies /entities with immediate effect.

Question: What is the new Policy for import of gold by the Banks?

The new policy for import of gold is yet to be notified by RBI post scrapping of 20: 80 scheme on 28th November 2014 and it is anticipated that this would also be accompanied by some change in duty structure.

Question: We are a project exporter executing projects in Middle East. Are we eligible for long term advances?

Exporters having a minimum of three years’ satisfactory track record have been allowed to receive long term export advance up to a maximum tenor of 10 years to be utilized for execution of long term supply contracts for export of goods subject to the conditions:

(a) Firm irrevocable supply orders should be in place. The contract with the overseas party/ buyer should be vetted and clearly specify the nature, amount and delivery timelines of products over the years and penalty in case of non- performance or contract cancellation. Product pricing should be in consonance with prevailing international prices.

(b) Company should have capacity, systems and processes in place to ensure that the orders over the duration of the said tenure can actually be executed.

(c) The facility is to be provided only to those entities, who have not come under the adverse notice of Enforcement Directorate or any such regulatory agency or have not been caution listed.

(d) Such advances should be adjusted through future exports.

(e) The rate of interest payable, if any, should not exceed LlBOR plus 200 basis points. 

Question: Credit limit is calculated in Indian Rupees and while the overall export credit limits are fixed in Indian Rupees, the foreign currency component of export credit fluctuates based on the prevailing exchange rates with the result, Banks ask us to either refund the money over and above our limit due to exchange rate fluctuation or it restrict our limit to that extent. Is it correct?

RBI has issued a notification on 25th Sept, 2013 clarifying that alternatively, banks may denominate foreign currency component of export credit in foreign currency only with a view to ensuring that the exporters are insulated from Rupee fluctuations. The foreign currency component of export credit, sanctioned, disbursed and outstanding will be maintained and monitored in foreign currency. However, for translation of Foreign Currency assets in the banks’ book, the on-going exchange / FEDAI rates may be used.

Question: Does the RBI provides refinance to banks on providing export?
As announced in the Sixth Bi-Monthly Monetary Policy Statement, 2014-15 dated February 3, 2015, it has been decided to merge the Export Credit Refinance (ECR) facility with the system level liquidity provision with effect from the fortnight beginning on February 7, 2015. Accordingly, no new refinancing under the ECR will be available after February 6, 2015 and the refinancing availed up to February 6, 2015 may continue till its maturity.
Question: How can one liquidate the packing credit availed for export of consignment to a buyer in Africa?

The packing credit (pre-shipment credit) granted to an exporter can be liquidated out of proceeds of bills drawn for the exported commodities on its purchase, discount etc., thereby converting pre-shipment credit into post-shipment credit. Further, it can also be repaid out of balances in Exchange Earners Foreign Currency A/c (EEFC A/c) as also from rupee resources of the exporter to the extent exports have actually taken place. 

Question: An Export House has received an order which is being passed on to us for execution. Can we obtain credit from the bank against the export order which is not in our name?

Banks may grant export packing credit to manufacturer supplier who does not have export orders in his own name and goods are exported through the export houses provided the following requirements are complied with apart from the usual stipulations:

(a) Banks should obtain from the export house a letter setting out the details of the export order and the portion thereof to be executed by the supplier and that the export house has not obtained packing credit in respect of such order.

(b) The export house should open inland L/Cs in favour of the supplier giving relevant particulars of the export orders and the outstanding in the packing credit account should be extinguished by negotiation of bills under such inland LCs. If it is inconvenient for the export house to open such inland LCs in favour of the supplier, the latter should draw bills on the export house in respect of the goods supplied for export and adjust packing credit advances from the proceeds of such bills

(c) Banks should obtain an undertaking from the supplier that the advance payment, if any, received from the export house against the export order would be credited to the packing credit account.

Question: What are the rules for receipt of advance payment for exports?

In terms of Regulation 16 of Notification No. FEMA 23/2000-RB dated May 3, 2000, where an exporter receives advance payment from a buyer, the exporter shall ensure that –

  • the shipment of goods is made within one year from the date of receipt of advance payment;
  • the rate of interest payable on the advance payment does not exceed LIBOR + 100 basis points; and
  • the documents covering the shipment are routed through the bank through whom the advance payment is received.
Question: We have received the payment 15 months back but as product development could not happen, we have to return the money. What is the procedure for the same?

In the event of the exporter’s inability to make the shipment, partly or fully, within one year from the date of receipt of advance payment, no remittance towards refund of advance payment can be made after the expiry of the period of one year, without the prior approval of the Reserve Bank. You may approach RBI through your Bank for such a request.

Question: We shipped our goods to a customer who backed out and now we are giving it to another customer at 80% & of invoice value. Do we require permission of RBI to transact it?

After a bill has been negotiated or sent for collection and its amount is to be reduced for any reason, you have to approach the bank. Bank may approve such reduction, if satisfied about genuineness of the request, provided:

(i) The reduction does not exceed 25 per cent of invoice value;

(ii) It does not relate to export of a product  subject to floor price stipulations;

(iii) The exporter is not on the exporters’ caution list of the Reserve Bank; and

(iv) The exporter is to surrender proportionate export incentives availed of, if any.

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.

Question: How much forward cover can be booked by an EXIM trader to safeguard against exchange volatility?

Exporters are allowed to hedge currency risk on the basis of a declaration of an exposure up to an eligible limit computed as the average of the previous three financial years’ (April to March) actual export turnover or the previous year’s actual export turnover, whichever is higher. Importers are allowed to hedge up to an eligible limit computed as 25 percent of the average of the previous three financial years’ actual import turnover or the previous year’s actual import turnover, whichever is higher. As per recent changes, contracts booked up to 75 percent of the eligible limit mentioned above may be cancelled with the exporter/importer bearing/being entitled to the loss or gain as the case may be.  Contracts booked in excess of 75 percent of the eligible limit mentioned above shall be on a deliverable basis and cannot be cancelled, implying that in the event of cancellation, the exporter/importer shall have to bear the loss but will not be entitled to receive the gain

Question: We would to avail the facility of receipt of import documents from overseas suppliers directly. Can we do it under banking regulation?

Import documents should normally be received from the banker of the supplier by the banker of the importer in India except in the following cases:

(i) Where the value of import bill does not exceed US$ 300,000

(ii) Import bills received by wholly-owned Indian subsidiaries of foreign companies from their principals.

(iii) Import bills received by Status Holder Exporters, 100% Export Oriented Units/Units in Special Economic Zones, Public Sector Undertakings and Limited Companies.

(iv) Import bills received by all limited companies viz. public limited, deemed public limited and private limited companies.

These categories of importers can directly receive documents from the foreign supplier.

Question: How long we can retain foreign exchange in EEFC Account to pay for imports?

All categories of foreign exchange earners are allowed to credit 100% of their foreign exchange earnings in their EEFC Accounts with the condition that  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 after adjusting for utilization of the balances for approved purposes or forward commitments.  Further, in case of requirements, EEFC account holders are permitted to access the forex market for purchasing foreign exchange. 

Question: We are a foreign company who is interested in executing a project for an Indian Company. Can we open a project office in India?

In terms of RBI regulation, general permission is granted to a foreign company to open project office in India provided it has secured from an Indian company, a contract to execute a project in India, and subject to satisfying certain other criteria. You are advised to apply to the Reserve Bank for prior permission to establish an office in India, whether Project Office or otherwise.

Question: What is the limit of bank refinance for exports by RBI and what rate RBI refinance to Banks?

As announced in the Sixth Bi-Monthly Monetary Policy Statement, 2014-15 dated February 3, 2015, it has been decided to merge the Export Credit Refinance (ECR) facility with the system level liquidity provision with effect from the fortnight beginning on February 7, 2015. Accordingly, no new refinancing under the ECR will be available after February 6, 2015 and the refinancing availed up to February 6, 2015 may continue till its maturity.

Banks were earlier obtaining refinance from RBI at the prevailing repo rate.

Question: What are the situation in which a person travelling to India has to declare foreign currency to authorities?

A visitor travelling to India has to declare Foreign exchange/currency beforethe custom officers:

(a) where the value of foreign currency notes exceed US $ 5000 or equivalent

(b) where the aggregate value of foreign exchange including currency exceeds US $ 10,000 or equivalent

Question: How much Jewellery can be brought as baggage?

An Indian passenger who has been residing abroad for over one year is allowed to bring jewellery, free of duty in his bonafide baggage upto an aggregate value of Rs. 50,000/- (in the case of a gentleman passenger) or Rs.1,00,000/- (in the case of a lady passenger).

Question: What are the new RBI guidelines for receipt of payment from a third party?

RBI has issued guideline for receipt of payment which empowers banks to allow payments for export of goods to be received from a third party (a party other than the buyer) subject to conditions as under:

a. Firm irrevocable order backed by a tripartite agreement should be in place;

b. Third party payment should come from a Financial Action Task Force (FATF) compliant country and through the banking channel only;

c. The exporter should declare the third party remittance in the Export Declaration Form;

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

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.

Question: What is the change made by RBI with regard to monitoring of past export?

RBI has provided that an old export bill may be closed by banks as a one-time measure, provided that the case is not subject matter of any pending civil suit /criminal suit ; the exporter has not come to the adverse notice of the Directorate of Enforcement (DoE)/Central Bureau of Investigation (CBI)/Directorate of Revenue Intelligence (DRI) /any such other law enforcement agency; has no externalisation problems with the export recipient countries and the export bill falls under following categories:

(i) With ceiling of USD 1, 00,000 and outstanding beyond 15 years as on December 31,2012

(ii) With ceiling of USD 50,000 and outstanding for more than 5 years as on December 31, 2012, where customers not traceable subject to proof of non traceability from competent authority and under bank’s internal boards approved policy.

Question: Export credit limits are calculated in Indian Rupees and the credit limit is apportioned between Rupee and foreign currency components depending upon the borrowers’ requirement. While the overall export credit limits are fixed in Indian Rupees, the foreign currency component of export credit fluctuates based on the prevailing exchange rates with the result, we are asked to either refund the money over and above our limit due to exchange rate fluctuation or it restrict our limit to that extent . What is the way to resolve it?

FIEO  has took up the matter with RBI which has issued a notification on 25th Sept, 2013 clarifying that alternatively, banks may denominate foreign currency (FC) component of export credit in foreign currency only with a view to ensuring that the exporters are insulated from Rupee fluctuations. The FC component of export credit, sanctioned, disbursed and outstanding will be maintained and monitored in FC. However, for translation of FC assets in the banks’ book, the on-going exchange/FEDAI rates may be used.

Question: Is Exports under Priority Sector lending of the Banks?

The RBI vide its circular dated 23rd April 2015 has revisited  the existing priority sector lending guidelines and inter- alia included export credit for domestic banks besides other sectors .

The Export Credit extended as per the details below would be classified as priority sector.

Domestic banks

Foreign banks with 20 branches and above

Foreign banks with less than 20 branches

Incremental export credit over corresponding date of the preceding year, up to 2 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, effective from April 1, 2015 subject to a sanctioned limit of ₹25 crore per borrower to units having turnover of up to ₹100 crore.

Incremental export credit over corresponding date of the preceding year, up to 2 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, effective from April 1, 2017 (As per their approved plans, foreign banks with 20 branches and above are allowed to count certain percentage of export credit limit as priority sector till March 2016).

Export credit will be allowed up to 32 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher.

 

The priority sector non-achievement will be assessed on quarterly average basis at the end of the respective year from 2016-17 onwards, instead of annual basis as at present.

The revised guidelines are operational with effect from the date of this circular. The priority sector loans sanctioned under the guidelines issued prior to this date will continue to be classified under priority sector till repayment/maturity/renewal.

Question: What is the change made by RBI recently in the period of Realisation of export proceeds by exporters?

Earlier RBI circular dated November 20, 2012 extending the enhanced period for realization and repatriation to India, of the amount representing the full value of exports, from six months to twelve months from the date of export. This relaxation was available up to March 31, 2013. Subsequently  Circular No. 105 dated May 20, 2013, brought down  this period to  to nine months from the date of export, valid till September 30, 2013, while  Circular No. 35 dated April 01, 2002,  Circular No. 25 dated November 01, 2004 and A.P. (DIR Series) Circular No.108 dated June 11, 2013, the Units located in SEZs, Status Holder Exporters, EOUs,Units in EHTPs, STPs & BTPs were allowed to realize/repatriate  to India within a period of twelve months from the date of export.

However this has been reviewed and since November 20, 2014  it has been decided,  that the period of realization and repatriation of export proceeds shall be nine months from the date of export for all exporters including Units in SEZs, Status Holder Exporters, EOUs, Units in EHTPs, STPs & BTPs  while for warehouses the stipulation of 15 months will continue as  earlier


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