IMPORTS

Imports – Prerequisites
AD1 banks are to ensure that Imports are in accordance with:
 Exim Policy
 RBI Guidelines
 FEMA Rules
 Goods are as per OGL (Open General list).
 Importer is having IEC (Import Export Code) issued by DGFT.
Imports
Formalities &
Time limit for
import payment
The following are essential elements of Imports:
1. An importer before remitting proceeds exceeding USD 5000 must
submit application on Form A-1 to the Authorized Dealer.
2. AD banks can issue LC on the basis of License and Exchange
Control Copy.
Remittance against exports should be completed within 6 months from
date of shipment.
 Any delay beyond 6 months will be treated as Deferred
Payment arrangement and the same will be treated as
Trade Credit up to the period less than 3 years.

Advance
Remittances
AD Banks may remit advance payment of Imports subject to following
conditions:
 Up to USD 200000 or equivalent after satisfying about nature of
transaction, trade and standing of Supplier.
 In excess of 2,00,000 USD, an irrevocable Standby LC or
Guarantee from a bank of international repute or a guarantee from
bank in India, if such guarantee is issued against Counter guarantee
of International bank outside India.
 The requirement of guarantee may not be insisted upon in case of
remittances above USD200000 up to USD 50, 00,000 (5 million)
subject to suitable policy framed by BOD of bank. The AD should be
satisfied with track record of the exporter.
 Approval of RBI is required only if Advance remittance exceeds
USD 50,00000 or equivalent.
 Advance remittance will be made direct to overseas supplier or his
bank.
 Physical imports must be made within 6 months from date of
Remittance. For Capital goods, the period is 3 years.
Evidence of
Imports
Importer must submit Evidence of Imports i.e. Exchange control copy of
“Bill Of Entry”. The AD will ensure receipt of Bill Of Entry in all cases
where Value of Forex exceeds USD 100000, within 3 months from date of
remittance.
If Bill of Entry is not received within 6 months, AD will forward Statement to
RBI on Half yearly basis on BEF Form.
Import Finance Importer can avail finance from banks/FIs in the shape of :
1. Letter of Credit
2. Import Loans against Pledge/Hypothecation of stocks.
3. Trade Credit – Supplier Credit or Buyer Credit.
Trade Credit If the Import proceeds are not remitted, within 6 months, it is treated as
Trade Credit up to the period less than 3 years. For period 3 years and
above, the credit is called ECB (External Commercial Borrowings).
Types of Trade Credit: There are two types of Trade Credit:
1. Suppliers Credit
2. Buyers Credit
Suppliers’ Credit
It is credit extended by Overseas suppliers to Importer normally beyond 6
months up to period of 3 years.
 Up to 1 year for Current Account Transactions
 Up to Less than 3 years for Capital Account Transactions
Monetary Limit is USD 20 million per transaction.
Buyers’ Credit
It is credit arranged by Importer from Banks/FIs outside countries. Banks
can approve proposals of Buyers‟ Credit with period of Maturity:
 Up to 1 year for Current Account Transactions
 Up to Less than 3 years for Capital Account Transactions
Monetary Limit is USD 20 million per transaction.

Crystallization of
Foreign
Currency
Liability into INR
In case the importer fails to make payment,
Crystallization of Foreign Exchange liability into Indian Rupees is done on
10th day at Bill selling Rate or Original Bill Selling rate (whichever is
higher)
In case of Retirement of Import Bill
The crystallization is done at current Bill Selling Rate on the following dates
 DP Bill: On 10th Day from date of receipt of Import Bill.
 DA Bill: On Actual Due Date.
All-in Cost
Ceiling
The present Ceilings for all-in-cost, including interest for buyers‟/suppliers‟
credit, as fixed by RBI is as under:
1. Up to 365 days –--------------------- 6M LIBOR + 350 bps
2. Above 1 year up to 3 years ---------6M LIBOR + 350 bps
These ceilings include management fees, arrangement fees etc.
Example On 12th Feb, a customer has received an Import bill for USD 10000/-. He
asks you to retire the bill to the debit of the account. Considering Exchange
margin 0.15% for TT sales and 0.20% on Bill Selling Rate. What amount
will be debited to the account? Spot rate is 34.6500/34.7200
Spot march = 5000/4500
Rate applied will be Bill Selling Rate
Spot Rate = 34.7200
Add Margin for TT selling (0.15%) = 0.0520
TT selling Rate = 34.7720
Add margin for Bill selling@ 0.20% = 0.0695
Bill Selling Rate = 34.8415
Customers‟ account will be debited with Rs. 348400/- (10000X 34.84)Ans.
RATES TO BE APPLIED IN FOREIGN EXCHANGE TRANSACTIONS
Nature of transaction Rate to be applied
Encashing Foreign currency Currency Buying rate
Encashing Traveler Cheques TC Buying rate
Issue of Draft in Foreign currency TT Selling rate
Payment of draft where Nostro account
stands credited already
TT Buying rate
Purchase of Export Bill Bill Buying rate
Purchase of Sight Bill i.e. DP under FOBP Bill Buying
Discounting of Usance Bill i.e. DA under
FUBD
Spot rate - Exchange
Margin + Forward
Premium
Payment of Imports Bill Selling
Repatriation of NRE deposits TT selling
Repatriation of FCNR deposits No rate
Crystallization of Overdue Export Bills on
30th day after Notional due date
TT Selling rate or
Original Bill buying rate
27
Whichever is higher
Crystallization of LC liability on 10th day Bill Selling rate or
Contracted rate
Whichever is higher
Retirement of Import Bill Bill Selling rate
Crystallization of Import bill on 10th day If
there is default by the buyer
Bill Selling rate or
Contracted rate
Whichever is higher
Cancellation of Forward Purchase
Contract on 7th working day after due date
TT selling rate
Cancellation of Forward Sales Contract
on 7th Working Day after due date
TT buying rate