prpri RBI Empowering AD Banks on External Trade, Facilitation & Exports RBI Empowering AD Banks on External Trade, Facilitation & Exports

Considering the ease of doing business and quicken the approval process pertaining to external trade, RBI has issued a circular, A.P. (DIR Series) Circular No. 08 dated 4th December 2020, empowering AD Banks on the following:

Direct Dispatch of Shipping Document: Till now, AD Banks were empowered to regularize cases of dispatch of shipping documents by exporter direct to the consignee or his agent resident in the country of the final destination of goods, equivalent to USD 1 million per export shipment. Now, AD banks are empowered to regularize the cases of direct dispatch of shipping documents without any limit subject to below conditions:

  • Export proceeds are realized in full except written off, if any, in accordance with the extant provisions for write off.
  • Exporter is a regular customer of AD bank for a period of at-least six months.
  • Exporter’s account with AD bank is fully compliant with extant KYC / AML guidelines.
  • AD bank is satisfied about bonafides of the transaction.

Write-off of Unrealized Export Bills: Till now, AD Banks were empowered to allow the write off upto 10% of the total export proceeds realized during the previous calendar year. This was cumulative limit available in a year. This circular empowers AD Banks to allow write off without any limit in the following cases, provided AD Bank is satisfied with the documentary evidences submitted to it:

  • The overseas buyer has been declared insolvent and a certificate from the official liquidator, indicating that there is no possibility of recovery of export proceeds, has been produced;
  • The unrealized amount represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organization;
  • The goods exported have been auctioned or destroyed by the Port / Customs / Health authorities in the importing country.

Set-off of Export Receivables against Import payables: Till now, AD banks were allowing exporters/importers to set-off their outstanding export receivables against outstanding import payables from/to the same overseas buyer/supplier. Now AD banks are empowered for allowing such set-off with their overseas group/associate companies either on net basis or gross basis, through an in-house or outsourced centralized settlement arrangement subject to certain conditions as specified in the Circular.

Refund of Export Proceeds: Till now, AD banks were allowed to consider requests for refund of export proceeds of goods exported due to poor quality from India provided goods are re-imported into India. Many instances where re-importing of goods was not possible as the exported goods were auctioned/destroyed in the importing country, were being referred to RBI for approval. Now AD banks, while permitting refund of export proceeds of goods exported from India, shall:

  • Exercise due diligence on track record of exporter;
  • Verify bona-fides of the transaction/s;
  • Obtain from exporter a certificate issued by DGFT/Custom authorities that no export incentive has been availed of by the exporter against the relevant export or the proportionate export incentives availed, if any, have been surrendered;
  • 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.

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A Fellow Member of the Institute of Chartered Accountants of India (1991 batch) has close to 3 decades of rich & varied experience, in industries ranging from Energy & Power, Manufacturing, FMCG to Financial Services. Vikas Maheshwari specializes in the vast domain of Treasury Management an View Full Profile

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July 2021