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19 Nov 2024
The Reserve Bank of India (RBI) has proposed a rationalization of norms for export and import transactions to enhance ease of doing business and enable banks to provide more efficient foreign exchange services.
According to the draft guidelines, exporters must provide a declaration specifying the full export value of goods or services. The full export value must be realized and repatriated to India within nine months from the shipment date for goods or the invoice date for services.
These draft regulations, released under the Foreign Exchange Management Act (FEMA), invite comments by September 1, 2024. They propose that exporters who fail to realize the full export value within the specified time be placed on a caution list.
Such exporters would only be allowed to export against full advance payment or an irrevocable letter of credit, as deemed satisfactory by the authorized dealer.
The draft also stipulates that no advance remittance for importing gold and silver should be permitted without specific approval from the central bank. Advance payments for exports are allowed as per the export contract, provided the interest rate does not exceed the all-in-cost ceiling of trade credit.
If exporters fail to meet their obligations under the contract, the advance must be refunded immediately, although authorized dealers may grant extensions for fulfilling the export obligations. For project exports on deferred payment terms, prior approval from the authorized dealer is required.
The RBI has also proposed that banks establish a comprehensive, board-approved policy within six months of the circular's issuance to handle payment transactions related to the export and import of goods and services. This policy should facilitate international trade and ensure non-discriminatory procedures.
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