The Reserve Bank of India (RBI) has published the following draft notifications in relation to regulation of foreign trade (export and import transactions) inviting public comments:
- Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2024 (Draft Regulations)
- Directions to Authorised Dealer Banks on Export and Import of Goods and Services (Draft Directions)
The comments to both these draft directions were to be provided to the RBI by September 1, 2024. These draft notifications have been issued by the RBI in line with the announcements made in its Statement on Developmental and Regulatory Policies for June 2024, wherein the regulator had announced its decision to rationalise regulations that cover export and import transactions. The proposed notifications are intended to promote ease of doing business, especially for small exporters and importers. They are also intended to empower authorised dealer banks to provide quicker and more efficient service to their foreign exchange customers.
The key aspects under each of these notifications are as follows:
- Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2024
The key points covered by the Draft Regulations include inter alia the following aspects:
Declaration of Exports: Every exporter shall furnish to the specified authority, a declaration in the Form annexed to these regulations, specifying the amount representing the full export value of the goods or services.
Period within which full export value to be realised: The amount representing the full export value of goods and services shall be realised and repatriated to India within nine months from the date of shipment for goods and date of invoice for services.
Advance Payment: Advance payment for export of goods and services may be received as per the export contract.
Project Exports: For export of goods or services on deferred payment terms or in execution of a turnkey project or a civil construction contract, the exporter shall, before entering into any such export arrangement, submit the proposal for prior approval of the Authorised Dealer, which shall consider the proposal in accordance with the rules/regulations/directions under FEMA.
- Draft Directions to Authorised Dealer Banks on Export and Import of Goods and Services
The key points covered by the Draft Directions include inter alia the following aspects:
- General Directions
The general directions under the Draft Directions include inter alia the following:
- Authorised Dealers Category-I banks (AD Banks) shall facilitate payments for export and import of goods and services including Merchanting Trade Transactions in compliance with the provisions under FEMA and also ensure adherence to the extant Foreign Trade Policy.
- AD Banks shall carry out due diligence and ensure bona fides of transaction in compliance with the Know Your Customer (KYC) Directions issued by RBI.
- AD Banks shall, inter alia, follow up with exporters and importers for: (a) Realization and repatriation of export proceeds; (b) Submission of the relevant documentary evidence pertaining to export and import transactions; and (c) Closure and reconciliation of the outstanding entries in Export Data Processing and Monitoring System (EDPMS) and Import Data Processing and Monitoring System (IDPMS).
- Specific Directions
The specific directions under the Draft Directions include inter alia the following:
- Declaration of Exports: AD Banks shall verify and ensure that exports are duly declared by exporters in terms of Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2024, before crediting the payment to the exporter’s account. Further, AD Banks shall enter details of service exports in EDPMS, as declared and submitted by their customer only, on the same day of receipt of documentary evidence.
- Set-off of export receivables against import payables: AD Banks may allow set-off of export receivables against import payables in respect of the same counterparties, if they are satisfied that the grounds for such requests are legitimate and justifiable.
- Reduction in realisable value of export: AD Banks, on request of the exporter, may permit reduction in the full export value after satisfying themselves of the bona fides of such requests.
- Advance payment for import of goods and services: AD Banks may, as per their internal assessment and subject to their satisfaction with the track record of the importer, permit advance remittance for an import transaction, subject to conditions, if any, they may specify.
For more details, kindly refer to these draft notifications published by the RBI, available by clicking on these links – link (Draft Regulations) and link (Draft Directions).
Authors & Contributors
Partner(s):
Associate(s):
Keshav Pareek
Ishaan Gupta