RBI and DGFT
RBI controls Foreign Exchange and DGFT (Directorate General of Foreign
Trade) controls Foreign Trade. Exim Policy as framed in accordance with
FEMA is implemented by DGFT. DGFT functions under direct control of
Ministry of Commerce and Industry. It regulates Imports and Exports
through EXIM Policy.
On the other hand, RBI keeps Forex Reserves, Finances Export trade and
Regulates exchange control. Receipts and Payments of Forex are also
handled by RBI.
IEC - Importer
Exporter Code
One has to apply for IEC to become eligible for Imports and Exports. DGFT
allots IEC to Exporters and Importers in accordance with RBI guidelines
and FEMA regulations. EXIM Policy is also considered before allotting IEC.
Export
Declaration
Form
All exports (physically or otherwise) shall be declared in the following Form.
1. GR form--- meant for exports made otherwise than by post.
2. PP Form---meant for exports by post parcel.
3. Softex form---meant for export of software.
4. SDF (Statutory Declaration Form)----replaced GR form in order to
submit declaration electronically.
SDF is submitted in duplicate with Custom Commissioned who puts its
stamp and hands over the same to exporter marked “Exchange Control
Copy” for submission thereof to AD.
Exemptions
Up to USD 25000 (value) – Goods or services as declared by the
exporter.
Trade Samples, Personal effects and Central Govt. goods.
Gift items having value up to Rs. 5.00 lac.
Goods with value not exceeding USD 1000 value to Myanmar.
Goods imported free of cost for re-export.
Goods sent for testing.
ADs may consider waiver for export of goods free of cost for export
promotion up to 2% of average annual exports of previous 3 years subject
to ceiling of Rs. 5.00 lac. The limit is Rs. 10.00 lac for Status Holder
Exporters.
Prescribed Time
limits
The time norms for export trade are as under:
Submission of documents with “Exchange Control Copy” to AD
within 21 days from date of shipment.
Time period for realization of Export proceeds is has been reduced
to 9M for all types of exports including exports to SEZ (Special
economic zones), SHE(Status Holder Exporters) and 100%EOUs.
Previously, the time period was 12Months for SEZs and SHEs.
For, Exports to Warehouse established outside India, as soon as it
is realized and in any case within fifteen months from the date of
shipment of goods
After expiry of time limit, extension is sought by Exporter on ETX
Form. The AD can extend the period by 6M.
However, reporting will be made to RBI on XOS Form on half yearly basis
in respect of all overdue bills which remained outstanding for more than
prescribed period or the bills which are overdue
Direct Dispatch
of Shipping
Documents
AD banks may handle direct dispatch of shipping documents provided
export proceeds are up to USD 1 Million and the exporter is regular
customer of at least 6 months.
Advance
Payments
Exporters may receive advance payments from their overseas importers
provided:
Shipment is made within 1 year from receipt of advance.
Rate of interest payable should not exceed LIBOR+100 bps.
Documents are routed through AD from which advance was routed.
Prescribed
Method of
payment and
Reduction in
export proceeds
Exporter will receive payment though any of the following mode:
Bank Drafts, TC, Currency, FCNR/NRE deposits, International
Credit Card. But the proceeds can be in Indian Rupees from Nepal
and Bhutan.
Export proceeds from ACU countries can be settled in ACU/EURO
or ACU/Dollar. A separate Dollar/Euro account is maintained which
is denominated as ACU Dollar or ACU EURO.
ACU – Asian Clearing Union was formed in Tehran, Iran in 1974 and it
comprises of following 9 countries as members.
India, Bangladesh, Bhutan, Myanmar, Iran, Pak, Srilanka, Nepal and
Maldives.
Exporters may be allowed to reduce the export proceeds with the following:
Reduction in Invoice value on account of discount for pre-payment
of Usance bills (maximum 25%)
Agency commission on exports.
Claims against exports.
Write off the unrecoverable export dues up to maximum limit of 10%
of export value.
The proceeds of exports can be got deposited by exporter in any of the
following account:
1. Overseas Foreign Currency account.
2. Diamond Dollar account.
3. EEFC (Exchange Earners Foreign Currency account)
DDA _ diamond
Dollar accounts
Diamond Dollar account can be opened by traders dealing in Rough and
Polished diamond or Diamond studded Jewellary with the following
conditions:
1. With track record of 2 years.
2. Average Export turnover of 3 crores or above during preceding 3
licensing years.
DDA account can be opened by the exporter for transacting business in
Foreign Exchange. An exporter can have maximum 5 Diamond Dollar
accounts.
EEFC Exchange Earners Foreign Currency accounts can be opened by exporters.
100% export proceeds can be credited in the account which does not earn
interest but this amount is repatriable outside India for imports (Current
Account transactions).
Pre-shipment
Finance or
Packing Credit
Packing credit has the following features:
1. Calculation of FOB value of order/LC amount or Domestic cost of
production (whichever is lower).
2. IEC allotted by DGFT.
3. Exporter should not be on the “Caution List” of RBI.
4. He should not be under “Specific Approval list” of ECGC.
5. There must be valid Export order or LC.
6. Account should be KYC compliant.
Liquidation of Pre-shipment credit
Out of proceeds of the bill.
Out of negotiation of export documents.
Out of balances held in EEFC account
Out of proceeds of Post Shipment credit.
Concessional rate of interest is allowed on Packing Credit up to 270
days. Previously, the period was 180 days. Running facility can also be
allowed to good customers.
Post Shipment
Finance
Post shipment finance is made available to exporters on the following
conditions:
IEC accompanied by prescribed declaration on GR/PP/Softex/SDF
form must be submitted.
Documents must be submitted by exporter within 21 days of
shipment.
Payment must be made in approved manner within 6 months.
Normal Transit Period is 25 days.
The margin is NIL normally. But in any case, it should not exceed
10% if LC is there otherwise it can be up to 25%.
Types of Post Shipment Finance:
Export Bills Purchased for sights bills and Discounting for Usance
bills.
Export bills negotiation.
Discrepancies of Documents
Late Shipment, LC expired, Late presentation of shipping documents, Bill
of Lading not signed properly, Incomplete Bill of Lading, Clause Bill of
Lading , Short Bill of Lading or Inadequate Insurance.
Advance against Un-drawn Balance
Undrawn balance is the amount less received from Importers. Bank can
finance up to 10% undrawn amount up to maximum period of 90 days.
Advance against Duty Drawback
Duty drawback is the support by Government by way of refund of
Excise/Custom duty in case the domestic cost of the product is higher than
the Price charged from the importer. This is done to boost exports despite
international competition. Bank can make loan to exporter against Duty
Drawback up to maximum period of 90 days.
GATS Credit can be afforded to exporters of all the 161 services covered under
GATS “General Agreement on Trade in Services”. The provisions
applicable to export of goods apply mutatis mutandis to export of services.
Crystallization of
Overdue Bills
Consequent upon non-realization, Conversion of Foreign Exchange liability
into Rupees is called crystallization. It is done on 30th day from notional
due date at prevailing TT selling rate or Original Bill Buying Rate
(Whichever is higher).
DA Bills
Notional due date is calculated in DA Bill by adding normal period of transit
i.e. 25 days in the Usance period. 30th day is taken from notional due date.
DP Bills
30th day after Normal Transit Period
If 30th day happens to be holiday or Saturday, liability will be
crystallized on the following working day.
Policy has been liberalized and crystallization period will be decided by
individual banks.
Export of
services
Credit can be provided to exporters of all 161 tradable services covered
under GATS (General Agreement on Trade in services) where payment for
such services is received in Forex. The provisions applicable to export of
goods apply to export of services.
Gold Card
Scheme
All exporters in Small and Medium Sector with good track record are
eligible to avail Gold Card Scheme. The conditions are :
1. Account should be classified as Standard assets for the last 3
years.
2. Limit is sanctioned for 3 years and thereafter automatic renewal.
3. There is provision of 20% Standby limit.
4. Packing Credit is allowed in Foreign currency.
5. Concessional rate is allowed for 90 days initially which can be
extended for 360 days.
6. Bank may waive collateral and provide exemption from ECGC
Guarantee schemes.
7.
Factoring and
Forfaiting
Factoring is financing and collection of Receivables. The client sells
Receivables at discount to Factor in order to raise finance for Working
Capital. It may be with or without recourse. Factor finances about 80%
and balance of 20% is paid after collection from the borrower. Bill should
carry LR/RR. Maximum Debt period permitted is 150 days inclusive of
grace period of 60 days. Debts are assigned in favour of Factor. There are
2 factors in International Factoring. One is Export Factor and the other is
Import Factor. Importer pays to Import factor who remits the same to Export
Factor.
Forfaiting is Finance of Export Receivables to exporter by the Forfaitor. It
is also called discounting of Trade Receivablessuch as drafts drawn under
LC, B/E or PN.It is always No Recourse Basis (i.e. without recourse to
exporter). Forfaitor after sending documents to Exporters‟ Bank makes
100% payment to exporter after
deducting applicable discount. Maximum
period of Advance is 180 days.
RBI controls Foreign Exchange and DGFT (Directorate General of Foreign
Trade) controls Foreign Trade. Exim Policy as framed in accordance with
FEMA is implemented by DGFT. DGFT functions under direct control of
Ministry of Commerce and Industry. It regulates Imports and Exports
through EXIM Policy.
On the other hand, RBI keeps Forex Reserves, Finances Export trade and
Regulates exchange control. Receipts and Payments of Forex are also
handled by RBI.
IEC - Importer
Exporter Code
One has to apply for IEC to become eligible for Imports and Exports. DGFT
allots IEC to Exporters and Importers in accordance with RBI guidelines
and FEMA regulations. EXIM Policy is also considered before allotting IEC.
Export
Declaration
Form
All exports (physically or otherwise) shall be declared in the following Form.
1. GR form--- meant for exports made otherwise than by post.
2. PP Form---meant for exports by post parcel.
3. Softex form---meant for export of software.
4. SDF (Statutory Declaration Form)----replaced GR form in order to
submit declaration electronically.
SDF is submitted in duplicate with Custom Commissioned who puts its
stamp and hands over the same to exporter marked “Exchange Control
Copy” for submission thereof to AD.
Exemptions
Up to USD 25000 (value) – Goods or services as declared by the
exporter.
Trade Samples, Personal effects and Central Govt. goods.
Gift items having value up to Rs. 5.00 lac.
Goods with value not exceeding USD 1000 value to Myanmar.
Goods imported free of cost for re-export.
Goods sent for testing.
ADs may consider waiver for export of goods free of cost for export
promotion up to 2% of average annual exports of previous 3 years subject
to ceiling of Rs. 5.00 lac. The limit is Rs. 10.00 lac for Status Holder
Exporters.
Prescribed Time
limits
The time norms for export trade are as under:
Submission of documents with “Exchange Control Copy” to AD
within 21 days from date of shipment.
Time period for realization of Export proceeds is has been reduced
to 9M for all types of exports including exports to SEZ (Special
economic zones), SHE(Status Holder Exporters) and 100%EOUs.
Previously, the time period was 12Months for SEZs and SHEs.
For, Exports to Warehouse established outside India, as soon as it
is realized and in any case within fifteen months from the date of
shipment of goods
After expiry of time limit, extension is sought by Exporter on ETX
Form. The AD can extend the period by 6M.
However, reporting will be made to RBI on XOS Form on half yearly basis
in respect of all overdue bills which remained outstanding for more than
prescribed period or the bills which are overdue
Direct Dispatch
of Shipping
Documents
AD banks may handle direct dispatch of shipping documents provided
export proceeds are up to USD 1 Million and the exporter is regular
customer of at least 6 months.
Advance
Payments
Exporters may receive advance payments from their overseas importers
provided:
Shipment is made within 1 year from receipt of advance.
Rate of interest payable should not exceed LIBOR+100 bps.
Documents are routed through AD from which advance was routed.
Prescribed
Method of
payment and
Reduction in
export proceeds
Exporter will receive payment though any of the following mode:
Bank Drafts, TC, Currency, FCNR/NRE deposits, International
Credit Card. But the proceeds can be in Indian Rupees from Nepal
and Bhutan.
Export proceeds from ACU countries can be settled in ACU/EURO
or ACU/Dollar. A separate Dollar/Euro account is maintained which
is denominated as ACU Dollar or ACU EURO.
ACU – Asian Clearing Union was formed in Tehran, Iran in 1974 and it
comprises of following 9 countries as members.
India, Bangladesh, Bhutan, Myanmar, Iran, Pak, Srilanka, Nepal and
Maldives.
Exporters may be allowed to reduce the export proceeds with the following:
Reduction in Invoice value on account of discount for pre-payment
of Usance bills (maximum 25%)
Agency commission on exports.
Claims against exports.
Write off the unrecoverable export dues up to maximum limit of 10%
of export value.
The proceeds of exports can be got deposited by exporter in any of the
following account:
1. Overseas Foreign Currency account.
2. Diamond Dollar account.
3. EEFC (Exchange Earners Foreign Currency account)
DDA _ diamond
Dollar accounts
Diamond Dollar account can be opened by traders dealing in Rough and
Polished diamond or Diamond studded Jewellary with the following
conditions:
1. With track record of 2 years.
2. Average Export turnover of 3 crores or above during preceding 3
licensing years.
DDA account can be opened by the exporter for transacting business in
Foreign Exchange. An exporter can have maximum 5 Diamond Dollar
accounts.
EEFC Exchange Earners Foreign Currency accounts can be opened by exporters.
100% export proceeds can be credited in the account which does not earn
interest but this amount is repatriable outside India for imports (Current
Account transactions).
Pre-shipment
Finance or
Packing Credit
Packing credit has the following features:
1. Calculation of FOB value of order/LC amount or Domestic cost of
production (whichever is lower).
2. IEC allotted by DGFT.
3. Exporter should not be on the “Caution List” of RBI.
4. He should not be under “Specific Approval list” of ECGC.
5. There must be valid Export order or LC.
6. Account should be KYC compliant.
Liquidation of Pre-shipment credit
Out of proceeds of the bill.
Out of negotiation of export documents.
Out of balances held in EEFC account
Out of proceeds of Post Shipment credit.
Concessional rate of interest is allowed on Packing Credit up to 270
days. Previously, the period was 180 days. Running facility can also be
allowed to good customers.
Post Shipment
Finance
Post shipment finance is made available to exporters on the following
conditions:
IEC accompanied by prescribed declaration on GR/PP/Softex/SDF
form must be submitted.
Documents must be submitted by exporter within 21 days of
shipment.
Payment must be made in approved manner within 6 months.
Normal Transit Period is 25 days.
The margin is NIL normally. But in any case, it should not exceed
10% if LC is there otherwise it can be up to 25%.
Types of Post Shipment Finance:
Export Bills Purchased for sights bills and Discounting for Usance
bills.
Export bills negotiation.
Discrepancies of Documents
Late Shipment, LC expired, Late presentation of shipping documents, Bill
of Lading not signed properly, Incomplete Bill of Lading, Clause Bill of
Lading , Short Bill of Lading or Inadequate Insurance.
Advance against Un-drawn Balance
Undrawn balance is the amount less received from Importers. Bank can
finance up to 10% undrawn amount up to maximum period of 90 days.
Advance against Duty Drawback
Duty drawback is the support by Government by way of refund of
Excise/Custom duty in case the domestic cost of the product is higher than
the Price charged from the importer. This is done to boost exports despite
international competition. Bank can make loan to exporter against Duty
Drawback up to maximum period of 90 days.
GATS Credit can be afforded to exporters of all the 161 services covered under
GATS “General Agreement on Trade in Services”. The provisions
applicable to export of goods apply mutatis mutandis to export of services.
Crystallization of
Overdue Bills
Consequent upon non-realization, Conversion of Foreign Exchange liability
into Rupees is called crystallization. It is done on 30th day from notional
due date at prevailing TT selling rate or Original Bill Buying Rate
(Whichever is higher).
DA Bills
Notional due date is calculated in DA Bill by adding normal period of transit
i.e. 25 days in the Usance period. 30th day is taken from notional due date.
DP Bills
30th day after Normal Transit Period
If 30th day happens to be holiday or Saturday, liability will be
crystallized on the following working day.
Policy has been liberalized and crystallization period will be decided by
individual banks.
Export of
services
Credit can be provided to exporters of all 161 tradable services covered
under GATS (General Agreement on Trade in services) where payment for
such services is received in Forex. The provisions applicable to export of
goods apply to export of services.
Gold Card
Scheme
All exporters in Small and Medium Sector with good track record are
eligible to avail Gold Card Scheme. The conditions are :
1. Account should be classified as Standard assets for the last 3
years.
2. Limit is sanctioned for 3 years and thereafter automatic renewal.
3. There is provision of 20% Standby limit.
4. Packing Credit is allowed in Foreign currency.
5. Concessional rate is allowed for 90 days initially which can be
extended for 360 days.
6. Bank may waive collateral and provide exemption from ECGC
Guarantee schemes.
7.
Factoring and
Forfaiting
Factoring is financing and collection of Receivables. The client sells
Receivables at discount to Factor in order to raise finance for Working
Capital. It may be with or without recourse. Factor finances about 80%
and balance of 20% is paid after collection from the borrower. Bill should
carry LR/RR. Maximum Debt period permitted is 150 days inclusive of
grace period of 60 days. Debts are assigned in favour of Factor. There are
2 factors in International Factoring. One is Export Factor and the other is
Import Factor. Importer pays to Import factor who remits the same to Export
Factor.
Forfaiting is Finance of Export Receivables to exporter by the Forfaitor. It
is also called discounting of Trade Receivablessuch as drafts drawn under
LC, B/E or PN.It is always No Recourse Basis (i.e. without recourse to
exporter). Forfaitor after sending documents to Exporters‟ Bank makes
100% payment to exporter after
deducting applicable discount. Maximum
period of Advance is 180 days.
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