Forex and Trade For Members

Forex And Trade
Disclaimers
The material is for general training purpose only and does not constitute professional advice.
Important Statutes And Rules

Foreign Exchange Management Act,1999
Notifications, Master circulars, Master Directions,A.P.(Dir) Series of circulars issued by RBI.
Circulars issued by DGFT
FEDAI guidelines
ICC rules including for
Uniform rules for collection 522
Uniform Custom and Practice for Documentary Credit (UCPDC) 600
Uniform rules of Demand Guarantees (URDG), 758
The International Standby Practices 1998 (ISP98)
International Standard Banking practice for examination of documents under
Documentary Credits, 745 (ISBP 745)
Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credit (URR),
725
CA Lokesh Gupta email calokeshgupta@gmail.com Mob:98104 34904

Some concepts
 Cash date/ Trade date- Date of Transaction
 Spot Date - Second Working day from cash date
 Tom Date - Next working day from cash date
 Spot Rate - Rate quoted and transacted today for settlement on spot date.
Foreign Exchange Rates

A currency exchange rate is the value of a certain world currency with respect to another
currency.
Direct Quote
It is the amount of local currency needed to buy one unit of the foreign currency and the
amount of home currency respectively due to be received when one unit of foreign currency is
being sold.
i.e. 1 foreign currency unit = x home currency units
Indirect Quote
It is the amount of foreign currency needed to buy one unit of the home currency i.e. 1 home
currency unit = x foreign currency units.
Cross Currency Quote

When a currency quote is given without the Indian Rupee as one of its components, this is
called a cross currency, i.e. when home currency is not involved in the currency pair.
Categories of Dealers
1) Authorised Dealer Category I

2) Authorised Dealer Category II
3) Authorised Dealer Category III
4) Full Fledged Money Changer (FFMC)

Forex
 Sale of foreign currency and Travellers Cheques
 Sale of Travel Card and reload of balance on card.
Clean outward remittances

Foreign Exchange Management (Current Account Transactions) Rules, 2000.
 Prohibited transactions (Schedule I)
 Transactions requiring prior approval (Schedule II)
 Permitted remittances subject to ceilings (Schedule III)
 In respect of remittance applications for miscellaneous current account

transactions of amount not exceeding USD 25,000, Authorised Dealers may obtain
simplified Application-cum-Declaration form (Form A2)
Prohibited transactions (schedule I)

a) Remittance out of lottery winnings.
b) Remittance of income from racing/riding etc. or any other hobby.
c) Remittance for purchase of lottery tickets, banned /proscribed magazines, football
pools, sweepstakes, etc.
d) Payment of commission on exports made towards equity investment in Joint Ventures /
Wholly Owned Subsidiaries abroad of Indian companies.
e) Remittance of dividend by any company to which the requirement of dividend balancing
is applicable.
f) Payment of commission on exports under Rupee State Credit Route, except commission
up to 10% of invoice value of exports of tea and tobacco.
g) Payment related to "Call Back Services" of telephones.
h) Remittance of interest income on funds held in Non-Resident Special Rupee (Account)
Scheme.
Schedule II
Purpose of Remittance Ministry /Department of GOI whose approval is required
Culture Tours Ministry of Human Resources Development,

(Department of Education and Culture)
Advertisement in foreign print media other Ministry of Finance, (Department of Economic Affairs)
than for tourism, foreign investments and
international bidding (exceeding USD 10,000)
by a State Govt. and its PSU

Remittance of freight of vessel chartered by a Ministry of Surface Transport,(Chartering Wing)
PSU
Payment of import through ocean transport by Ministry of Surface Transport, (Chartering Wing)
a Govt. Department or a PSU on c.i.f. basis
Multi-modal transport operators making Registration Certificate from the Director General of shipping
remittance to their agent abroad
Remittance of hiring Charges of transponders Ministry of Information and Broadcasting
by Ministry of Communication and information Technology
(a) TV Channels
(b) Internet Service provider
Remittance of container detention charges Ministry of Surface Transport ( Director General of Shipping)
exceeding the rate prescribed by Director
General of Shipping
Remittance of prize/sponsorship of sports Ministry of Human Resources Development
abroad by a person other than International (Development of Youth Affairs and Sports)
/National/State Level sports bodies, if amount
exceeds USD 100,000.
Remittance for membership of P&I Club Ministry of Finance (Insurance Division )
Transactions with ceilings (some examples of Schedule III)

a) Donations by Corporate, upto 1% of their forex earnings during the previous 3 FY or USD
50,00,000 whichever is less for specified purposes.
b) Exceeding net salary for a person resident but not permanently resident(less than 3
years) in India for remittance for maintenance of close relatives abroad.
c) Commission, per transaction, to agents abroad for sale of residential flats or commercial
plots in India exceeding USD 25,000 or 5% of the inward remittance whichever is more.
d) Remittances exceeding US$ 10,000,000 per project for any consultancy services in
respect of infrastructure projects and US$ 1,000,000 per project, for other consultancy
services procured from outside India.
e) Remittances exceeding 5% of investment brought into India or USD 1,00,000 whichever
is higher, by an entity in India by way of reimbursement of pre-incorporation expenses.
Limit USD 250,000 within the overall ceiling of LRS. Beyond which RBI approval required:
Private visits to any country (except Nepal and Bhutan)
Gift or donation
Going abroad for employment
Emigration
Maintenance of close relatives abroad
Travel for business, conference, specialised training
Meeting expenses for medical expenses abroad
Attendant to a patient going abroad for medical treatment
Studies abroad
Any other current account transactions
Exception where amount more than above may be taken without RBI approval
For medical treatment - Estimate from Medical institution offering treatment
For Emigration abroad - Excess may be allowed only towards meeting incidental
expenses in the country of immigration and not for earning points or credits to become
eligible for immigration by way of overseas investments in government bonds; land;
commercial enterprise; etc.
For Studies abroad - Estimate from University where education taken.
Liberalised Remittance Scheme (LRS)
AD may freely allow remittances by resident individuals up to USD 250,000 per financial year
(April-March) for any permitted current or capital account transactions or a combination of
both.
 Requirement are as follows:

Application-cum-declaration form
PAN number
Bank account with a bank for a minimum period of one year prior to the remittance
(applicable only for capital account transaction)
The facility is available to all resident individuals including minors for transactions other than
Schedule I or Schedule II
Margins or margin calls to overseas exchanges / overseas counterparty
Purchase of FCCBs by Indian Cos in overseas Secondary market
Remittance for trading in foreign exchange abroad

Remittances directly or indirectly to Bhutan, Nepal,Pakistan or any country
identified by FATF (www.fatf.gafi.org) as non co-operative country (Iran and
North Korea).

Resident individuals are allowed to acquire immovable property and can acquire shares (of
listed companies or otherwise) or debt instruments or any other asset outside India without
prior approval of the Reserve Bank.
Individuals can also open, maintain and hold foreign currency accounts with a bank outside
India for making remittances under the Scheme without prior approval of the Reserve Bank.
Banks should not extend any kind of credit facilities to resident individuals to facilitate
remittances under the Scheme.
AD should be satisfied about source of funds.
Out of above Currency notes :

 Upto a maximum of USD 3,000; or
 If travel to Iraq or Libya then upto USD 5000.
 Travellers proceeding for Haj/Umrah pilgrimage -as specified by the Haj Committee of
India.
 If travel to Islamic Republic of Iran, Russian Federation and other Republics of
Commonwealth of Independent States then full amount may be released in currency
notes.
 Foreign Currency against surrender of forex done earlier for non residents and foreign
nationals
Reconversion of unspent Indian currency held by non-residents and foreign nationals, at the
time of their departure from India, into forex on the basis of Valid Encashment Certificate.
In case of ATM slips reconversion of Indian rupees to the extent of Rs.50000/- may be
allowed to foreign tourists only and not non-residents against original ATM receipts duly
verified with original debit/credit card and Valid Passport and Visa and confirmed Ticket for
departure within 7 days.
 AML requirement
Sale may be made upto a maximum amount of Rs.50,000/- against cash receipt. Further for
cash received exceeding (Rs.25000/-upto 31.12.2015) Rs.50,000/- copy of PAN/Form 60 is
mandatory under Rule 114B of the Income Tax Act.
Also in case of travel outside India where the rupee equivalent of foreign exchange drawn
exceeds Rs 50,000 either for any single drawal or more than one drawal reckoned together for
a single journey/visit, it should be paid by cheque or draft.
It should be kept in mind that all sales to one person within 30 days of the last transaction is to
be treated as a single transaction for computation of above limit of Rs.50000/-.
Forex
 Purchase of Foreign Currency

 Purchase of Travelers Cheques
 Refund of balance in Travel card
Purchase of foreign currency and Travellers Cheques
- Forex purchased for a specific purpose and not utilized for that purpose can be utilized
for any other eligible purpose for which drawal of foreign exchange is permitted.
However resident individual needs to surrender received / realised / unspent / unused
foreign exchange to an Authorised Person within a period of 180 days from the date of
receipt / realisation / purchase /acquisition / date of return of the traveller, as the case
may be other than for export of goods and services.
- Returning traveller is permitted to retain with him, foreign currency travellers cheques
and currency notes up to an aggregate amount of USD 2000 and foreign coins without
any ceiling beyond 180 days.
AML Requirement.
- Payment in cash against purchase of forex from a resident individual upto a limit of USD
1000 or its equivalent currency.
- All purchase within a period of 30 days from the date of first transaction would be
aggregated for the purpose of considering the above limits.
- Currency Declaration Form (CDF) is required to be obtained in case of purchase of

currency exceeding USD 5000 or its equivalent currency and USD 10000 or its equivalent
currency for purchase of currency and Travellers Cheque put together.

Special accounts under FEMA
No restriction under these regulations shall be applicable for opening of rupee/ foreign
currency deposit accounts by certain persons, viz.
(i) Rupee/ foreign currency accounts by foreign diplomatic missions and diplomatic
personnel or their family members in India with an Authorised Dealer in India subject to
conditions mentioned therein.
(ii) Deposits in rupees maintained by persons resident in Nepal and Bhutan with Authorised
Dealer in India.
(iii) Deposits with Authorised Dealer in India maintained by any multilateral organization, of
which India is a member nation, and the subsidiary/ affiliate bodies and officials of such
organizations in India.
Definitions
A Non Resident Indian (NRI) is a person resident outside India, who is a citizen of India.
A person of Indian origin (PIO) is a person resident outside India who is a citizen of any
country other than Bangladesh or Pakistan or such other country as may be specified by
CG, satisfying the following conditions:
a) Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act,
1955 (57 of 1955); or
b) Who belonged to a territory that became part of India after the 15.8.1947; or
c) Who is a child or a grandchild or a great grandchild of a citizen of India or of a person
referred to in clause (a) or (b); or
d) Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a
person referred to in clause (a) or (b) or (c).
PIO will include an ‘Overseas Citizen of India’ cardholder.
Resident is a person residing in India for more than 182 days during the course of the
preceding financial year but does not include—
(A) a person who has gone out of India or who stays outside India, in either case—
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside India, or
(c) for any other purpose, in such circumstances as would indicate his
intention to stay outside India for an uncertain period;
(B) a person who has come to or stays in India, in either case, otherwise than—
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in India, or
(c) for any other purpose, in such circumstances as would indicate his
intention to stay in India for an uncertain period;
Eligible credits to NRE

1) Transfer from other NRE/FCNR accounts.
2) Interest accruing on the funds held in the account.
3) Repayment by resident individual of loan obtained from close relatives outside India
upto USD 250,000/- or its equivalent, if the loan was extended by way of inward
remittance in foreign exchange through normal banking channels or from NRE/FCNR
accounts. (RBI/2011-12/465 dated March 21, 2012)
4) Dividend income paid by Indian companies after the 1st April, 2003, irrespective of
source of investment.
5) Interest on NRO account at the time of credit.
6) Refund of application/earnest money made by the house building agencies on account

of non-allotment of flat/plot, together with interest (net of income tax payable thereon)
provided the original payment was made out of NRE/FCNR account or from remittance
from outside India through normal banking channels.
7) Interest and Maturity proceeds of Govt Securities and dividend on units of mutual funds,
provided purchase from NRE/FCNR account or inward remittance.
8) Refund of share/debenture subscriptions to new issues of Indian companies, if

subscription was paid from NRE/FCNR account of remittance from outside India.
9) Proceeds of remittances to India in any permitted currency.
10) Transfer from NRO account of NRI within the overall ceiling of USD one million per
financial year subject to payment of tax, as applicable.(i.e. as applicable if funds were
remitted abroad) (RBI/2011-12/536 dated May 07, 2012)
11) Current Income such as rent, pension, interest, with CA certificate and
undertaking for payment of tax.
12) FDI done by NRI in Indian Companies under the repatriation route subject to due
payment of tax.
13) Proceeds of personal cheques drawn by account holder on his foreign currency
account and of travellers cheques (issued outside India), bank drafts payable in any
permitted currency, deposited by the account holder in person to AD during his
temporary visit to India.
14) Proceeds of foreign currency/bank notes tendered by account holder during his
temporary visit to India, provided
1) CDF is attached, where applicable.
2) notes are tendered to the AD(not money changer) in person by the account holder
himself and AD is satisfied that account holder is a person resident outside India.
FCNR Account (FCNR (B))

o Only in form of term deposits of minimum period of 1 year and maximum period of 5 years
from NRIs
o Interest paid on basis of 360 days to a year and calculated and paid at intervals of 180 days
each.
o No interest paid if premature done for less than 1 year and penalty to cover swap cost may
be charged.
o Maximum Rate of interest for Duration (as per FEDAI quoted rate)
1 year to less than 3 years LIBOR/Swap plus 2%
3 – 5 years LIBOR/Swap plus 3%
EEFC Account
o Only in form of non-interest bearing current account. No credit facilities are allowed against
the same.100% export proceeds can be credited to EEFC account.
o Sum total of the accruals in the account during a calendar month should be converted into
Rupees on or before the last day of the succeeding calendar month after adjusting for
utilisation and forward commitments.
o WEF 22.01.2013 , EEFC holders are permitted to access the forex market for purchasing
forex without utilizing fully the available balances in the EEFC accounts.(RBI/2012-13/390
A.P.(DIR series) Circular No.79).
Resident Foreign Currency (Domestic) Account (RFC)
A person resident in India can open, hold and maintain with an AD in India, a RFC Account, out
of foreign exchange acquired in the form of currency notes, bank notes and travellers cheques
from any of the sources like, payment for services rendered abroad, as honorarium, gift,
services rendered or in settlement of any lawful obligation from any person not resident in
India. Further the account may be opened / credited with foreign exchange earned abroad,
including proceeds of export of goods and/or services, royalty, honorarium, etc., and/or gifts
received from close relatives and repatriated to India through normal banking channels.
Further credits are unspent foreign exchange for travel, forex acquired while on visit to outside
India by way of honorarium or gift or forex received from non-resident, who is on a visit to
India as honorarium, gift, for services rendered or in settlement of any lawful obligation.
Diamond Dollar Account
Firms and companies dealing in purchase/sale of rough or cut diamonds/precious metal

jewellery with track record of atleast 2 years and average annual turnover of Rs.3 crores or
above during three preceding years.
Special Non-Resident Rupee (SNRR) Account

Any person resident outside India, having a business interest in India, may open an SNRR
account in INR:
I. The SNRR account shall carry the nomenclature of the specific business for which it is
opened and shall not earn any interest.
II. The debits/ credits and the balances in the account shall be incidental and
commensurate with the business operations of the account holder.
III. The tenure of the account should be concurrent to the tenure of the contract/ period of
operation/ the business of the account holder and shall in no case exceed seven years.
IV. The balances in the SNRR account shall be eligible for repatriation.
V. Opening of account by individual/ entities of Pakistan/ Bangladesh nationality/
ownership will require prior approval of the Reserve Bank of India.

FCRA Act, 2010
o Person defined as (i) an individual; (ii) a HUF; (iii) an association; and (iv) a company
registered u/s 25 of the Companies Act, 1956.
o A ‘person’, having a definite cultural, economic, educational, religious or social
programme can receive foreign contribution after it obtains the prior permission of the
Central Government, or gets itself registered with the Central Government.
‘Foreign contribution’ means the donation, delivery or transfer made by any foreign source,
a) any currency, whether Indian or foreign
b) any security including any foreign security
c)any article not being an article given to a person as a gift for personal use, of market value in
India is in excess of Rs.25000/-.
d) Interest on foreign contribution deposited in any bank
e) A subsequent donation, delivery or transfer from person receiving from any foreign source is
also covered.
Explanation 3 –Amount received by way of fee, cost in lieu of goods or services rendered by
such person in the ordinary course of his business, trade or commerce whether within India or
outside India is not foreign contribution.
“Foreign source” includes

i) Government of foreign country or territory and any agency of such govt.
ii) Any International Agency except exempted entities
iii) A foreign company
iv) A corporation incorporated in a foreign country or territory
v) A multi-national corporation, as defined
vi) Indian Company with more than 50% shares with foreign Govt, foreign citizens,
foreign corporations, trusts, societies or other associations, formed or registered in a
foreign territory, foreign company.(amended by Finance bill, 2016 wef 26.09.2010 to
exclude cos where share capital is within limit specified under FEMA)
vii) Trade union in any foreign country or territory
viii) A foreign trust or a foreign foundation or those are mainly financed by a foreign
country or territory.
ix) A society, club or other association of individuals formed or registered outside India
x) A citizen of a foreign country

• Foreign contribution needs to be deposited in exclusive single account of a bank, as per order
for registration or prior permission granted by MHA. No local funds can be credited to such
account.
• Foreign contribution received cannot be transferred to any other person unless such other
person is also registered under FCRA Act.
• Registration is valid for 5 years only and for existing registered associations the same would
expire automatically on 30th April, 2016.
• Registration once granted can be cancelled by the Central Government.
• Any person whose certificate has been cancelled shall not be eligible for registration for a
period of 3 years from date of cancellation.
• Registration may also be suspended which would not only mean that no foreign contribution
can be received but also that funds already received cannot be utilised.
Reporting by banks
WEF 14.12.2015, the bank shall report to CG within 48 hours any transaction in respect
of receipt or utilisation of any FC by any person whether or not such person is registered
or granted prior permission.
who cannot accept foreign contribution

a) Candidate for election
b) Correspondent, columnist, cartoonist, editor, owner, printer, publisher of a registered
newspaper.
c) Judge, Govt servant or employee of body controlled by Govt.
d) Member of any legislature
e) Political party or office bearer thereof
f) Organisation of political nature, as specified
g) Association or Company in production or broadcast of audio news or audio visuals or
current affairs programmes and their correspondent or columnist etc.
h) Individuals or associations prohibited specifically.

Imports into India
 Nostro account
A Nostro account is a banking term to describe an account one bank holds with another bank in
a foreign country, usually in the currency of that foreign country.
 Vostro Account
A Vostro account is a local currency account maintained by a local bank for a foreign
(correspondent) bank. This allows for easy cash management because currency is not required
to be converted.
 SWIFT is a trademark of Society for Worldwide Interbank Financial Telecommunication.

SWIFT does not facilitate funds transfer; rather, it sends payment orders, which must be
settled by correspondent accounts that the institutions have with each other.
 MT700/701 – Issue of documentary credit
 MT707 – amendment to documentary credit

 MT 103- used for making payments. Wire transfer, TT
 MT202 – Financial institution transfer
 MT 752-Authorisation to pay, accept or negotiate
 MT754 – Advice for payment/acceptance/negotiation of LC
 MT756 – Advice for reimbursement or payment
 MT799 - free text format
Incoterms (Incoterms 2010)

INCOTERMS are most frequently listed by category. Terms beginning with F refer to shipments
where the primary cost of shipping is not paid for by the seller.
C deal with shipments where the seller pays for shipping.
E terms occur when a seller's responsibilities are fulfilled when goods are ready to depart from
their facilities.
D terms cover shipments where the shipper/seller's responsibility ends when the goods arrive
at some specific point. In addition, D terms also deal with the pier or docking charges found at
ports.
EXW (EX-Works), FOB (Free On Board), FCA (Free Carrier), FAS (Free Alongside Ship), CFR (Cost
and Freight), CIF (Cost, Insurance and Freight), DDU (Delivered Duty Unpaid), DDP (Delivered
Duty Paid)

Direct Import transactions
a) Receive the customer request with documents such as
Commercial invoice cum packing list
AWB/BL
FEMA Declaration
NNL/Original exchange control copy of licence
Bill of Entry (BOE) through IDPMS or physical/ Postal Appraisal form/ CA certificate.
Remittances against imports should be completed not later than six months from the date
of shipment, except in cases where amounts are withheld towards guarantee of
performance, etc.
b) AD Category – I banks may permit settlement of import dues delayed due to disputes,
financial difficulties, etc. Interest in respect of delayed payments, usance bills or overdue
interest for a period of less than three years from the date of shipment may be permitted as
per limit applicable to trade credits.
c) For proprietorship or a partnership the payment can be made only upto USD 3,00,000. If
import is in excess or equivalent of usd 300,000 the importer has to be necessarily a
company, a status holder, or a unit in SEZ.
d) If import do not exceed USD 5000 no documents, except a simple letter, as long as it is for a
current account transaction (and is not in the Schedules I and II of the FEMA) and the
payment is made by a cheque drawn on the applicant's bank account or by a Demand Draft.
Advance remittance transactions

a) Customer request letter and other documents including PO/ PI, Import license, if
applicable etc.
b) If advance remittance exceeds USD 200,000 or its equivalent (USD 500,000 or its
equivalent for Services) any amount for merchanting trade transaction, an
unconditional, irrevocable standby Letter of Credit or a guarantee from an international
bank of repute situated outside India or a guarantee of an AD Category – I bank in India,
if such a guarantee is issued against the counter-guarantee of an international bank of
repute situated outside India, is required.
c) In cases where the importer (other than a Public Sector Company or a
Department/Undertaking of the Government of India/State Government/s) is unable to
obtain bank guarantee from overseas suppliers and the AD bank is satisfied about the
track record and bonafides of the importer, the requirement of the bank guarantee /
standby Letter of Credit may not be insisted upon for advance remittances up to USD
5,000,000. Banks may frame their own internal guidelines to deal with such cases as the
bank's Board of Directors.
d) Some exemption is available for diamond importers, aircraft/helicopter purchase for
schedule Air transport Companies with specified conditions.
e) A Public Sector Company or a Department/Undertaking of the Government of India /
State Government/s which is not in a position to obtain a guarantee is required to obtain
a specific waiver for the bank guarantee from the Ministry of Finance, GOI before
advance remittance exceeding USD 100, 000.
Import under bills for collection/ Imports under LC

a) Documents are received from the Foreign Bank and check the availability of documents as per
the covering schedule of the foreign bank.
b) Print the Presentation Memo and send to the customer for acceptance.
c) Receive the request to make the payment / acceptance from the customer.
d) Documents to be released only on realization of the bill. For usance bill the same is done after
acceptance.
e) If a non discrepant bill not accepted and is devolved and paid, documents are not to be
released to the customer till the time the bill amount is recovered from the customer account.
f) In case of direct receipt of documents from overseas seller by bank, report on each individual
overseas supplier from the overseas banker or a reputed credit agency if invoice value exceed
USD 300,000 provided the bank is satisfied about the bonafides of the transaction and track
record of the importer constituent.
g) In respect of imports on D/A basis, AD Category – I bank should insist on production of
evidence of import at the time of effecting remittance of import bill and may allow further
three months, in case of certain conditions and satisfaction about genuineness of request.
Obtention and completion of Form A2 & A3.

Issuance of certificate from concurrent auditor every fortnight for due diligence and
verification of form A2 and A3
Import Data Processing and Monitoring System

Made live from October 10, 2016 and Discontinue submission of hardcopy of Evidence of
Import documents i.e. BoE, with effect from December 01, 2016.
Bill of Entry (BoE) data is received in IDPMS from Customs Department for EDI ports and
from NSDL for SEZ on daily basis.
AD banks shall enter every subsequent activity Viz Document submission and outward
remittance data etc.

BoE data for non-EDI ports are entered by AD Category – I bank of the importer on
receipt of BoE (importer’s copy) and then the bank uploads the data in IDPMS through
“Manual BOE reporting” process.
Non physical imports

Where imports are made in non-physical form a certificate from a Chartered Accountant
that the software / data / drawing/ design has been received by the importer is required.
Non submission of import evidence

In case an importer does not furnish any documentary evidence of import within 3 months
from the date of remittance involving foreign exchange exceeding USD 100,000, the AD bank
should rigorously follow-up for the next 3 months, including issuing registered letters to the
importer.
AD bank should forward a statement on half-yearly basis as at the end of June & December of
every year, in form BEF furnishing details of import transactions, exceeding USD 100,000 in
respect of which importers have defaulted in submission of appropriate document evidencing
import within 6 months from the date of remittance, to the Reserve Bank, within 15 days from
the close of the half-year to which the statement relates.
 Trade credit
Refers to credit extended for imports directly by the overseas supplier, bank and financial
institutions for maturity of less than 3 years.
Suppliers' credit relates to credit for imports into India extended by the overseas
suppliers.
Buyers' credit refers to loans for payment of imports into India arranged by the importer
from a bank or financial institution outside India.
a) Not allowed for import of services and advance import.
b) Period maximum 1 year for non capital goods and 3 years for capital goods from date of
shipment.
c) Maximum period of credit, including the usance period of Letters of Credit opened for
import of Gold, Platinum, Palladium, Rhodium and Silver should not exceed 90 days from
the date of shipment, subject to conditions.
d) Maximum amount is 50 million per import transaction. For oil/gas refining & marketing,
airline and shipping companies amount is USD 150 million per import transaction.

e) All in cost should be 250 basis points over 6 months Libor/Euribor/yield of GOI securities
and includes other fees, expenses, charges, guarantee fees whether paid in FC or INR.
Withholding tax in INR is not included.
f) Discontinued the practice of issuance of LOU/LUT from March 13, 2018 vide RBI/2017-
18/139.
Four parts in Form 15CA

Part A – Aggregate Payment in a financial year < Rs.5 Lakh
Part B - After obtaining Certificate u/s 197 / order u/s195(2)/195(3)
Part C- After obtaining form No.15CB from CA
Part D- Payment which is not chargeable under the IT Act
No form required for any sum which is not chargeable under IT Act, if:
i) Remittance by an individual and it does not require prior approval of RBI as per
Sec.5 of FEMA read with Schedule III.
ii) 33 (earlier 28) types of remittances as specified in the circular

Export outside India
Export bill under LC from foreign bank.

Export bills for collection.
The exporter must submit a request letter stating clearly the documents to be delivered to the
foreign buyer and covering all instructions for the Indian Bank.
The documents must be accompanied by:

Commercial Invoice,
Packing List,
Bills of Exchange,
Signed and endorsed full set of original Bill of Lading/Airway Bill/ other transport document
and insurance policy, in case of CIF contracts.
Export bill under LC from foreign bank/ Export bills for collection.
Further exchange control copy of shipping bill with relevant EDF/SDF(withdrawn now)
/Softex form should be attached nominating the concerned bank.
Original LC duly endorsed and stamped should also be attached therewith, which should
be endorsed with the bill amount and returned back to customer. The documents must be
submitted within 21 days of the bill of lading.
Direct dispatch of documents to overseas buyer

AD Category – I banks may regularize cases of dispatch of shipping documents by the exporter
direct to the consignee or his agent resident in the country of the final destination of goods, up
to USD 1 million or its equivalent, per export shipment, subject to the following conditions:
a) The export proceeds have been realised in full.
b) The exporter is a regular customer of AD Category – I bank for a period of at least six
months.
c) The exporter’s account with the AD Category – I bank is fully compliant with the Reserve
Bank’s extant KYC / AML guidelines.
d) The AD Category – I bank is satisfied about the bonafides of the transaction.
Advance Against Export

Where an exporter receives advance payment from a buyer outside India, the exporter shall be
under an obligation to ensure that -
I. The shipment of goods is made within one year from the date of receipt of advance
payment;
II. The rate of interest, if any, payable on the advance payment does not exceed LIBOR +
100 basis points, and
III. The documents covering the shipment are routed through the Authorised Dealer
through whom the advance payment is received;
Provided that in the event of the exporter’s inability to make the shipment, partly or
fully, within one year from the date of receipt of advance payment, no remittance
towards refund of unutilised portion of advance payment or towards payment of
interest, shall be made after the expiry of the period of one year, without the prior
approval of the Reserve Bank.
Export bills under Advance payment

Banks may allow exporters to received advance payment for exports of goods which may
take more than 1 year to manufacture and ship and export agreement provides the same
subject to prescribed conditions, such as;
a) KYC and due diligence for overseas buyer
b) AML guidelines are ensured
c) Export advance to us to execute export
d) No instance of refund exceeding 10% of the advance payment in last 3 years
e) Rate of interest, if any should not exceed LIBOR+ 100 basis points.
 Export bills under Long term Advances
Cir no.132 dated 21.05.2014
Exporters with minimum 3 years satisfactory track record-advance upto 10 years tenor
for long term supply contracts:
a) KYC and due diligence for overseas buyer
b) Firm irrevocable supply order with capacity of exporter to execute.
c) Not under adverse notice of ED or other regulatory agency
d) Advance to be adjusted through future exports
e) Rate of interest, if any should not exceed LIBOR+ 200 basis points.
f) Documents through one bank only.
g) No double financing and no liquidation of NPA rupee loan
h) Receipt of USD 100 million or more to be reported

Manner of Export Realisation
Full export value of goods exported shall be received through an AD Bank in following manner:
a. Bank draft, pay order, banker's or personal cheques.
b. Foreign currency notes/foreign currency travellers’ cheques from the buyer during his
visit to India.
c. Payment out of funds held in the FCNR/NRE account maintained by the buyer
d. International Credit Cards of the buyer.
e. All transactions between a person resident in Nepal or Bhutan may be settled in Indian
Rupees or routed through ACU mechanism.
f. In precious metals, equivalent to value of jewellery exported.
g. Through Online Payment Gateway Service Providers (OPGSPs) for export value not
exceeding USD 10000.
h. Settlement system under ACU mechanism
Realisation of Export Proceeds

Exporter to realise and repatriate the full value of goods or software to India as under:
(i) By Units in Special Economic Zones (SEZs) – 9 months
(ii) By Status Holder Exporters, 100 % Export Oriented Units (EOUs) and units set up under
Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and
Biotechnology Parks (BTPs) schemes : 9 months
(iii) Goods exported to a warehouse established outside India : As soon as it is realised and
in any case within fifteen months from the date of shipment of goods; and
(iv) In all other cases: 9 months
Follow-up of Overdue Bills

Banks should furnish to the RBI, on half-yearly basis, a consolidated statement in Form XOS
giving details of all export bills outstanding beyond six months from the date of export as at
the end of June and December every year. The statement should be submitted in triplicate
within 15 days from the close of the relative half-year. Now centralised and online wef
December, 2013.
FIRC
a) Printing of FIRC on security stationery only in cases where the Foreign Inward
Remittance has been received for any one of the following purposes:
o Advance Payment for Exports (not allowed wef 1.5.2016)
o Receipt of export proceeds by an AD Bank other than the one who handles/handled the
GR Form (not allowed now due to EDPMS and e-firc)
o FDI/FII
Issue of Duplicate FIRC

a) Customer request requesting for issuance of duplicate FIRC.
b) Stamped (as per state Stamp Act) indemnity from the beneficiary.
c) Check that the FIRC has not been utilized.
d) The duplicate FIRC may be issued after a period of 10 days has elapsed from the date of
uploading the details on the FEDAI website.
e) Write/Affix a rubber stamp on the duplicate copy as prescribed.
Issuance of GR waiver certificate.

1. GR waiver from exporters for export of goods free of cost, for export promotion up to 2 per
cent of the average annual exports of the applicant during the preceding three financial
years subject to a ceiling of Rs.5 lakhs. For status holder exporters, the limit as per the
present Foreign Trade Policy is Rs.10 lakhs or 2 per cent of the average annual export
realization during the preceding three licensing years (April-March), whichever is higher.
2. Export of goods not involving any foreign exchange transaction directly or indirectly.
3. Goods are being exported for re-import after repairs / maintenance / testing / calibration,
etc., subject to the condition that the exporter shall produce relative Bill of Entry within one
month of re-import of the exported item from India.
4. Goods being exported for testing are destroyed during testing, banks may obtain a
certificate issued by the testing agency that the goods have been destroyed during testing.
5. Firms / Companies and other organizations participating in Trade Fair/Exhibition abroad can
take/export goods for exhibition and sale outside India.
The exporter shall produce relative Bill of Entry within one month of re-import into India of
the unsold items and the sale proceeds of the items sold are repatriated to India in
accordance with the FEMA.
The exporter shall report to the bank the method of disposal of all items exported, as well as
the repatriation of proceeds to India.Such transactions approved by the AD Category – I banks
will be subject to 100 per cent audit by their internal inspectors/auditors.
Issuance of Bank Realisation Certificate (BRC)

BRC is issued in Format as prescribed by DGFT and available as Appendix 22 A at URL
http://dgftcom.nic.in/exim/2000/apdx07/indexapp07.htm
BRC to be issued at the request of the customer for fully realized export bills only. AD obtain a
request letter with standard BRC format, copies of invoice, transport documents and
GR/Freight bill/Insurance Receipt/Shipping Bill. The amount to be stated in BRC is net amount
exclusive of freight, insurance & commission, if included therein and other details are
completely filled in the relevant format.
Copy of the BRC handed over to the customer alongwith Certified Invoice.
e-BRC mandatory w.e.f. 17.8.2012. (DGFT circular no.8 dated 6.7.2012)
Extension of Time for realisation of export proceeds and Write off

Extension of time and Self write-off by the exporters
(i) For export proceeds due within the prescribed period during a financial year all
exporters (Including Status Holder exporters) have been allowed to write-off (including
reduction in invoice value) outstanding export dues and extend the prescribed period of
realization beyond 12 months or further period as applicable. Limits as prescribed wef
March 12 , 2103
A)Self “write-off” by an exporter 5%*
b) Self “write-off” by Status Holder Exporters 10%*
c) ‘Write-off” by Authorized Dealer bank 10%*
*of the total export proceeds realized during the previous calendar year.
Other cases including cases under investigation by ED, DRI, CBI to be referred to RBI in
Form ETX through AD Bank.
Conditions of Write off of export proceeds:

 Amount to remain outstanding for more than 1 year
 Documents furnished for all efforts by exporter to realize the dues
 Exporter has surrendered proportionate export incentives.
 CA certificate for self write off, providing requisite details.
 Case under any one of below cases:
 Overseas buyer declared insolvent
Overseas buyer not traceable over long period
 Exported goods auctioned/destroyed by Port/customer etc
 Balance due in case settled through Indian Embassy, Foreign Chamber of Commerce etc.
 Undrawn balance of export bill turning unrealisable
 Cost of legal action disproportionate to balance outstanding or decree cannot be
executed
 Bill for difference between LC value and export value or difference in freight charges but
bill dishonoured.
Intermediary Trade
Merchant trade transactions
 Completion of both legs within 9 months
 Foreign exchange outlay within 4 months.
 Both the legs are routed through the same AD bank
 Where the payment for export leg of the transaction precedes the payment for
import leg, AD banks should ensure that the terms of payment are such that the
liability for the import leg of the transaction is extinguished by the payment
received for the export leg of the transaction and should not be available for other
than import payment or short term deployment of fund.
 If advance for the import leg-the same is against BG from an international bank of
repute wef 17.1.2014.
 All other points are applicable as for export/import leg; except
BOE for import leg
Shipping bill for export leg

Export Finance
Pre-Shipment Finance
 Export Packing Credit (EPC)
 Packing Credit in Foreign Currency (PCFC)
Post-Shipment Finance
 Bills Purchased/ Bills Discounted
 Advances against bills for collection
 Advances against duty drawback receivable from Government.
Pre-Shipment Finance –EPC/PCFC

‘Packing Credit' means any loan or advance granted or any other credit provided by a
bank to an exporter for financing the purchase, processing, manufacturing or packing of
goods prior to shipment / working capital expenses towards rendering of services on the
basis of letter of credit opened in his favour or in favour of some other person, by an
overseas buyer or a confirmed and irrevocable order for the export of goods / services
from India or any other evidence of an order for export from India having been placed on
the exporter or some other person, unless lodgement of export orders or letter of credit
with the bank has been waived.
Maximum period of Finance is 360 days from the date of advance and otherwise the
advance will cease to qualify for prescribed rate of interest for export credit to the exporter
ab initio
 Different accounts may be maintained for each disbursement or a running account facility
may be granted(not allowed for sub-suppliers).
 Liquidation of PC may be out of proceeds of bills drawn for the exported commodities on
its purchase, discount etc. thereby converting pre-shipment credit into post-shipment
credit. Also balance of EEFC account may be used for the same.

Export Finance
Post-Shipment Finance - Bills Purchased/ Bills Discounted

Period
In the case of demand bills, the period of advance shall be the Normal Transit Period (NTP) as
specified by FEDAI.
In case of usance bills, credit can be granted for a maximum duration of 365 days from date of
shipment inclusive of Normal Transit Period (NTP) and grace period, if any.
'Normal transit period' means the average period normally involved from the date of
negotiation / purchase / discount till the receipt of bill proceeds in the Nostro account of the
bank concerned, as prescribed by FEDAI from time to time. It is not to be confused with the
time taken for the arrival of goods at overseas destination.
Export Finance
Concessional rate offered to exporters by the bank subject to floor rate of 7% and claim of
interest subvention @3% on RBI by the banks on monthly basis after obtaining certificates
from CA. Enhanced to 5% wef November 2, 2018 for MEME borrowers (RBI/2018-19/81 dt
29.11.2018)
Banks are required to completely pass on the benefit of interest subvention, as applicable, to
the eligible exporters upfront and submit the claims to RBI for reimbursement duly certified by
the external auditor. The subvention would be reimbursed by RBI on the basis of claims
submitted by the banks.

Bank Guarantees
Domestic Guarantees
Foreign Inward Guarantee
Foreign Outward Guarantee
BG Issuance, Amendment, Invocation, Closure / cancellation, Duplicate BG.
Domestic Guarantees
Issuance and amendment
a) Branch to issue guarantees on a stamp paper of adequate value subject to the local Stamp
Act of that particular state.
b) Entry in software under appropriate head i.e. Financial BG or performance BG.

Letter of Credits
Undertaking to pay a third party at a given date according to agreed stipulations and against
presentation of documents, the counter value of the goods or services dispatched/ supplied,
rendered or otherwise.
Inland LC
Import LC
Standby Letter of Credit
LC Advising
Letter of credit is forwarded to the beneficiary by the advising bank. The advising bank
acts as a conduit between the issuing bank and the beneficiary. But it does not undertake
any liability on its own account. The advising bank ensures that the LC is apparently
authentic, the international banks use test key arrangements with correspondent banks to
ensure that messages used are secure. By an authenticated message the advising bank
holds out to the beneficiary that the message is an authenticated/authorized message
from the sender.
LC Confirmation
Confirmation of LC constitutes an undertaking on part of the confirming bank to pay to
the negotiating bank or the beneficiary without recourse if the documents are presented
in accordance with the terms and conditions of the LC. This undertaking is in addition to
the undertaking provided by the issuing bank.
Confirmation would not be added on transferrable LC.
LC Transfer
The first beneficiary of a letter of credit may request for the transfer of the credit to the
second beneficiary. This is allowed as per UCPDC. The credit should clearly nominate a
bank to transfer the LC and also provide for transfer of the credit before a LC can be
transferred. A transfer can be in parts or in whole as per the request of the first
beneficiary.

Foreign Direct Investment into India
Investment in Company
 Intimation within 30 days of inward remittance

 KYC from foreign bank, FIRC and form from customer
 FC-GPR form within 30 days of issuance of shares.
 FIRMS portal to be used.
Investment in Liaison Office (LO)/ Branch Office(BO) in India

Two Routes:
a)Reserve Bank Route
b)Government Route
Form FNC through AD Banks

Annual Activity Certificates(AAC) from CAs by September 30 or within 6 months of from due
date of Balance Sheet with copy to DG Income Tax (International Taxation), New Delhi.
Branch Offices permitted to remit outside India profit of the branch net of Indian Taxes.
Documents to be filed with AD are certified copy of Audited accounts and CA certificate
certifying manner of arriving at remittable profit, permitted activities and no profit on
revaluation of assets.
Permissible activity of liaison office

i. Representing in India the parent company / group companies.
ii. Promoting export / import from / to India.
iii. Promoting technical/financial collaborations between parent/group companies and
companies in India.
iv. Acting as a communication channel between the parent company and Indian companies.
Permissible activity of branch office
I. Export / Import of goods.
II. Rendering professional or consultancy services.
III. Carrying out research work, in areas in which the parent company is engaged.
IV. Promoting technical or financial collaborations between Indian companies and parent or
overseas group company.
V. Representing the parent company in India and acting as buying / selling agent in India.
VI. Rendering services in information technology and development of software in India.
VII. Rendering technical support to the products supplied by parent/group companies.
VIII. Foreign airline / shipping company.
Not allowed retail trade, manufacturing or processing activities.
Investment by residents abroad
JVs/ Wholly Owned Subsidiaries (WOS)
Prohibition
Investment in a foreign entity engaged in real estate (meaning buying and selling of real estate
or trading in Transferable Development Rights (TDRs) but does not include development of
townships, construction of residential/commercial premises, roads or bridges) or banking
business, without the prior approval of the Reserve Bank.
Automatic Route
 an Indian party has been permitted to make investment in overseas JVs/ WOS, not
exceeding 400 per cent of the net worth as on the date of last audited balance sheet of
the Indian party, i.e. a company incorporated in India or a body created under an Act of
Parliament or a partnership firm registered under the Indian Partnership Act, 1932 . The
limit of 400% is not applicable for investment:
 A) made from EEFC Account
 B)Funds raised through ADR/GDR
Automatic Route –Conditions

a)The Indian party should not be on the Reserve Bank’s Exporters' caution list / list of
defaulters to the banking system circulated by the Reserve Bank / Credit Information Bureau
(India) Ltd. (CIBIL) / or any other credit information company as approved by the Reserve Bank
or under investigation by any investigation / enforcement agency or regulatory body.
b) All transactions relating to a JV / WOS should be routed through one branch of an

Authorised Dealer bank to be designated by the Indian party.
c)If investment exceed USD 5 million or swap, valuation by Cat 1 merchant banker and in other
cases by CA/CPA.
File Form ODI with AD within 30 days from date of transaction.
Approval Route
Prior approval of the Reserve Bank would be required in all other cases of direct investment
including investment by proprietorship concerns and unregistered partnership firms, trusts and
Society, subject to satisfying certain eligibility criteria. For this purpose, application together

with necessary documents should be submitted in Form ODI through their Authorised Dealer
Category – I banks. Post investment changes / additional investment in existing JV / WOS will
require filing of Form ODI
Obligations
File Share certificates with AD
Repatriate due receivable from foreign entity
 ODI part I, II and III –Online Filing

Part II - Annual Performance Report (APR)
Part III-Report on Closure/Disinvestment/Voluntary Liquidation/ Winding up of JV / WOS

External Commercial Borrowings
Automatic Route
Approval Route
ECB is for minimum average maturity of 3 years and may be in form of:
 Commercial loans like bank loans

 Foreign Currency Convertible Bonds (FCCBs)
 Preference Shares
 Foreign Currency Exchangeable Bonds
 Buyers credit and suppliers credit
Automatic Route
 Borrowing should be from recognised lenders and should comply with amount and
maturity norms and should be utilised for permitted End-use.
 Maximum all-in-cost ceiling is as follows:
Average Maturity Period All-in-cost Ceilings over 6 month LIBOR/

EURIBOR/GOI securities
Wef 27.04.2018 for all cases +450 basis points
Borrowers may enter into loan agreement complying with the ECB guidelines with recognised
lender for raising ECB under Automatic Route without the prior approval of the Reserve Bank.
The borrower must obtain a Loan Registration Number (LRN) from the Reserve Bank of India
before drawing down the ECB.
Reporting Arrangements
For allotment of Loan Registration Number (LRN), borrowers are required to submit Form 83,
in duplicate, certified by a CS or CA to the designated AD bank. One copy is to be forwarded by
the designated AD bank to RBI.
The borrower can draw-down the loan only after obtaining the LRN from RBI.
Borrowers are required to submit ECB-2 Return certified by the AD bank on monthly basis so as
to reach RBI within seven working days from the close of month to which it relates.

Forex and Trade For Members

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Forex And Trade

Important Statutes And Rules

CA Lokesh Gupta email calokeshgupta@gmail.com Mob:98104 34904

Foreign Exchange Rates

Cross Currency Quote

1) Authorised Dealer Category I

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Clean outward remittances

 In respect of remittance applications for miscellaneous current account

Prohibited transactions (schedule I)

Culture Tours Ministry of Human Resources Development,

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Transactions with ceilings (some examples of Schedule III)

For medical treatment - Estimate from Medical institution offering treatment

For Studies abroad - Estimate from University where education taken.

Liberalised Remittance Scheme (LRS)

 Requirement are as follows:

Remittance for trading in foreign exchange abroad

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AD should be satisfied about source of funds.

Out of above Currency notes :

 Purchase of Foreign Currency

Purchase of foreign currency and Travellers Cheques

- Currency Declaration Form (CDF) is required to be obtained in case of purchase of

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Eligible credits to NRE

2) Interest accruing on the funds held in the account.

5) Interest on NRO account at the time of credit.

6) Refund of application/earnest money made by the house building agencies on account

8) Refund of share/debenture subscriptions to new issues of Indian companies, if

9) Proceeds of remittances to India in any permitted currency.

FCNR Account (FCNR (B))

Diamond Dollar Account

Firms and companies dealing in purchase/sale of rough or cut diamonds/precious metal

Special Non-Resident Rupee (SNRR) Account

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“Foreign source” includes

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who cannot accept foreign contribution

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 SWIFT is a trademark of Society for Worldwide Interbank Financial Telecommunication.

 MT707 – amendment to documentary credit

Incoterms (Incoterms 2010)

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Advance remittance transactions

Import under bills for collection/ Imports under LC

Obtention and completion of Form A2 & A3.

Import Data Processing and Monitoring System

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Non physical imports

Non submission of import evidence

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Four parts in Form 15CA

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Export bill under LC from foreign bank.

The documents must be accompanied by:

Direct dispatch of documents to overseas buyer

Advance Against Export

Export bills under Advance payment

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Realisation of Export Proceeds

Follow-up of Overdue Bills