RBI Export Proceeds Write-Off Rules: What Every Exporter & CFO Should Know
Summary: The Reserve Bank of India (RBI) framework provides exporters with a mechanism to write off unrealised export proceeds, subject to prescribed limits and conditions. Self-write-off is permitted up to 5% for exporters other than Status Holder Exporters and 10% for Status Holder Exporters, while AD Category-I banks may permit write-off up to 10%, based on total export proceeds realised during the preceding calendar year, with the limits reckoned cumulatively. The relevant amount must have remained outstanding for more than one year, reasonable efforts to realise the proceeds must be supported by satisfactory documentary evidence, and specified banking relationship, KYC/AML and bona fide transaction conditions must be met. Certain categories, including overseas buyer insolvency, settlement through specified organisations, and auction or destruction of exported goods, may qualify for write-off without monetary limit subject to the AD bank’s satisfaction with the evidence. The framework also requires surrender of proportionate export incentives where applicable and a Chartered Accountant’s certificate for self-write-off. The mechanism is intended to reduce administrative burden while regularising long-pending unrealised export proceeds.
- RBI Guidelines on Write-Off of Unrealised Export Proceeds
- 1. Limits for Write-Off
- Note: The above limits for self-write-off and write-off by the AD bank are to be reckoned cumulatively.
- 2. Key Conditions for Write-Off
- 3. Specified Categories
- 4. Cases Eligible for Write-Off Without Limit
- 5. Surrender of Export Incentives
- 6. Requirement of Chartered Accountant's Certificate
- Conclusion
RBI Guidelines on Write-Off of Unrealised Export Proceeds
The Reserve Bank of India (RBI) has provided a mechanism for exporters to write off unrealised export proceeds, subject to specified limits and conditions. The revised framework is intended to provide greater flexibility to exporters and Authorised Dealer (AD) banks while reducing the time involved in obtaining approvals for write-off of unrealised export bills.
1. Limits for Write-Off
| Category | Permissible Limit | Basis |
|---|---|---|
| Self-write-off by an exporter other than a Status Holder Exporter | 5% | Total export proceeds realised during the preceding calendar year |
| Self-write-off by a Status Holder Exporter | 10% | Total export proceeds realised during the preceding calendar year |
| Write-off by AD Category-I Bank | 10% | Total export proceeds realised during the preceding calendar year |
Note: The above limits for self-write-off and write-off by the AD bank are to be reckoned cumulatively.
2. Key Conditions for Write-Off
- Outstanding period: The export amount must have remained outstanding for more than one year.
- Reasonable efforts: The exporter must furnish satisfactory documentary evidence demonstrating that all reasonable efforts were made to realise the export proceeds.
- Banking relationship: The exporter should have been a regular customer of the AD bank for at least six months, should be compliant with KYC/AML requirements, and the AD bank should be satisfied regarding the bona fides of the transaction.
- Categorisation: The case must fall within one of the specified categories prescribed under the RBI framework.
3. Specified Categories
1. The overseas buyer has been declared insolvent and an official liquidator’s certificate confirms that there is no possibility of recovery.
2. The unrealised amount represents a balance settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or a similar organisation.
3. The exported goods have been auctioned or destroyed by the port, customs or health authorities in the importing country.
4. The overseas buyer is untraceable for a reasonably long period.
5. The unrealised amount represents an undrawn balance of an export bill, not exceeding 10% of the invoice value, which remains unrealised despite all efforts by the exporter.
6. The cost of legal action would be disproportionate to the unrealised amount, or the exporter, despite obtaining a favourable court decree, is unable to execute it for reasons beyond its control.
7. The bill was drawn for the difference between the Letter of Credit value and the actual export value, or between provisional and actual freight charges, and the amount remains unrealised following dishonour by the overseas buyer with no prospects of recovery.
4. Cases Eligible for Write-Off Without Limit
Importantly, the AD bank may, on the request of the exporter, permit write-off of unrealised export bills without any monetary limit where the case falls under the specified categories relating to:
- Insolvency of the overseas buyer;
- Settlement through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar organisation; or
- Auction or destruction of the exported goods by the relevant authorities in the importing country.
However, the AD bank must be satisfied with the documentary evidence submitted by the exporter.
5. Surrender of Export Incentives
Before permitting the write-off, the AD bank is required to ensure that the exporter has submitted documentary evidence regarding the surrender of proportionate export incentives, wherever such incentives were availed in respect of the relevant export bill.
Accordingly, exporters should carefully examine whether any export incentives were claimed against the unrealised export proceeds and ensure compliance with the applicable surrender requirements before applying for write-off.
6. Requirement of Chartered Accountant’s Certificate
In cases of self-write-off, the exporter is required to furnish a Chartered Accountant’s certificate to the AD bank.
- The export proceeds realised during the preceding calendar year;
- Details of the amount of write-off, if any, already availed during the current calendar year;
- Relevant details of the EDF/Export Bill proposed for write-off; and
- Confirmation that any export incentives availed by the exporter in respect of the relevant export bill have been surrendered.
Conclusion
The RBI’s write-off framework provides exporters with a structured mechanism to regularise export bills where recovery of the outstanding proceeds has become difficult or impossible despite genuine efforts. The facility can significantly reduce the administrative burden associated with long-pending unrealised export proceeds.
Exporters should, however, ensure that the prescribed limits, minimum outstanding period, documentary requirements, eligibility conditions and surrender of export incentives are duly complied with before approaching their AD bank for self-write-off or bank-approved write-off.
Practical takeaway: Exporters should maintain proper documentation evidencing their efforts to realise outstanding export proceeds and coordinate with their AD bank and Chartered Accountant to ensure that the write-off is appropriately supported and reported.
