Exports

Export trade is regulated by DGFT under Govt. of India. AD-I banks conduct export
transactions in conformity with the Foreign Trade Policy, the Rules framed by the
Govt. of India and the directions issued by RBI.

Realisation and Repatriation of export proceeds:

(a) Units in SEZs: maximum 9 months;

(b) Exported to a warehouse established outside India: Max 15 months from the
date of shipment of goods; and

(c) Other cases: 9 months. During Covid-19, period extended upto 12 months for
exports made till 31.07.2020.

Diamond Dollar Account (DDA): Firms and companies dealing in purchase/ sale
of rough or cut and polished diamonds etc. with a track record of at least 2 years
in import/ export of diamonds, gold jewellery etc. and having an average annual
turnover of Rs. 3 crores or above during the preceding 3 licensing years (April to
March) can transact their business through DDA. They can open maximum 5
Diamond Dollar Accounts with their banks.

Offices and Immovable Property for Overseas Offices:

For setting up of the office, AD-I banks may allow remittances towards initial
expenses up to 15% of the average annual sales/income or turnover during the
last 2 financial years or up to 25% of the net worth, whichever is higher. For
recurring expenses, remittances up to I 0% of the average annual sales/income
or turnover during the last 2 financial years may be sent.

Advance Payments against Exports: Exporter shall ensure that -

i. the shipment of goods is made within one year;

ii. the rate of interest payable on the advance payment does not exceed London
Inter-Bank Offered

Rate (LIBOR) + 100 basis points.

Long term supply contracts- advance payments for exports: Banks can allow up
to 10 years. ROI max LIBOR+ 2%. If amount is USD 100 million or above, RBI to be

1
Pre-Promotion Training Material 2021 Indian Overseas Bank, Staff College
informed immediately. Banks can issue BG/Standby LC up to 2 years which can
be rolled over 2 years.

Part Drawings /Undrawn Balances: Where it is the practice to leave a small part
of the invoice value undrawn for payment after adjustment due to differences in
weight, quality, etc. to be ascertained after arrival AD-I banks may negotiate the
bills, subject to a maximum of 10% of the full export value.

Opening/ Hiring of Ware houses abroad: Banks may grant permission for opening
I hiring warehouses abroad if export outstanding does not exceed 5% of exports
made during the previous financial year and applicant has a minimum export
turnover of USD 100,000/- during the last financial year.

Pre-Shipment Credit

• Exporter has importer-exporter code no. (IEC No.) allocated by DGFT, he is not
on caution list of RBI, on restricted list of ECGC.

• It is allowed on the basis of confirmed order, letter of credit or other evidence

for export of goods from India. Can be allowed for exhibition and sale abroad.

• Period is to be decided by the bank on the basis of shipment dates.

• ROI min base rate of the bank. On ad hoc limit, no additional ROI.

• Amount is linked to FOB value or domestic cost of goods. Where domestic cost
is higher than FOB value advance can be more than FOB value. In such cases, for
advance beyond the FOB value, concessional interest not available. This portion
to be adjusted within 30 days.

Liquidation is out of export proceeds or EEFC account. If not adjusted from post-
shipment proceeds for 360 days, it will not be allowed concessional rate from the
beginning.

• It can be a demand loan or a running account (to be adjusted on First in First

out basis). Running account not for sub-suppliers.

• Contract or order can be substituted.

• Pre-shipment credit for deemed exports is available at same concessional rate

of interest.

2
Pre-Promotion Training Material 2021 Indian Overseas Bank, Staff College
 Post-Shipment Credit

• Delay in submission of shipping documents: If documents are presented after

the prescribed period of 21days, banks may handle them without prior approval
of RBI if satisfied with the reasons for the delay.

• Export proceeds realisation period: Demand bills- normal transit period.

For usance bills max- 9 months (including NTP and grace period) 20.05.13. For SEZ
exporters, I 00% EOU, Status Holders- 9 months (17.11.14) and for warehouse
exports - 15 months.

• Rate of interest: ROI min base rate of the bank. On ad hoc limit, no additional
ROI. For export credit in Foreign Currency, it is at discretion of banks w.e.f.5.5.2012.

• Normal transit period means period normally involved from date of negotiation
to credit to NOSTRO a/c. It is fixed by FEDAI.

• Overdue bill in case of demand bill means the payment of which has not been
made before expiry of normal transit period. In case of usance bill, where the
payment has not been made on due date.

• Follow-up of Overdue Bills: Where bills remain outstanding, beyond the due
date and the exporter fails to arrange proceeds within 12 months or seek
extension of time, matter should be reported to RBI. The copies of GR Forms
should, be held by banks until the full proceeds are realised. (Now in EPDMS)

• Report to RBI: Banks should furnish a statement in Form XOS, to the RBI (end of
June and Dec:), giving details of all export bills outstanding beyond 6 months from
the date of export, in triplicate, within 15 days from the close of the relative half-
year. Separate report not to be sent from Dec 2015 onwards as information has
been integrated in EDPMS.

• Crystallization: It means conversion of foreign currency liability to rupee liability

to cover the interest rate fluctuation risk when a bill becomes overdue. The period
of crystallization as per discretion of the bank concerned (from Aug 2005
onwards). It is done at TT selling rate.

• Banks can allow payments for export of goods I software received from 3rd
party (party other than the buyer) subject to certain conditions.

3
Pre-Promotion Training Material 2021 Indian Overseas Bank, Staff College
Extension of time and Self write-off by the exporters: An exporter who has not been
able to realise the outstanding export for more than one year, may either self-
write off or approach the AD Category -I bank for write off of the unrealized
portion, subject to certain conditions. The limits prescribed for "write-offs" of
unrealized export bills are as under:

a. Self "write-off' by an exporter (Other than Status Holder 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 and will
be cumulatively available in a year.

• Within a month from the close of the financial year, exporters should submit a
statement of export proceeds due, realised and not realised to the AD-I banks
concerned.

• Extension of Time: AD- I banks can extend the period of realisation of export
proceeds beyond 12 months from the date of export, up to a period of 6 months,
at a time. For extension beyond one year, the total outstanding of the exporter
does not exceed USD one million or 10% of the average export realisations during
the preceding 3 financial years, whichever is higher.

• Write off by AD Category - I bank: Banks can allow write off if the amount has
remained outstanding for one year or more and the aggregate amount of write
off allowed during a financial year does not exceed 10% of the total export
proceeds realised by the concerned exporter during the previous financial year

AD-I banks are to send a statement in form EBW to RBI, indicating details of write
offs etc., every half year ended 31st March and 30th September within 15 days
from the date of completion of the relevant half year.

• DUTY-DRAWBACK advance available against claims provisionally certified by

Customs Dept., pending final sanction. ROI min base rate of the bank.

• Export credit limit can be fixed in FC also to take care of impact of fluctuation
of FC rate.

•Status Holders can export freely exportable items free of cost up to Rs. 10 lac or
2% of annual export realization of3 years.

4
Pre-Promotion Training Material 2021 Indian Overseas Bank, Staff College
 Gold Card Scheme for Exporters

Eligibility criteria for issue of gold cards:

•All credit worthy exporters (including in the small and medium sector) with good
track record are eligible.

•Loan accounts have been Standard a/c continuously for a period of 3 years to
be treated good track record.

•Exporters black listed by ECGC or on RBI's defaulters/caution list or making losses

for past 3 years are not eligible.

Credit limit fixation for issue of gold card:

•On the basis of anticipated export turnover, the banks can determine need-
based finance with a liberal approach.

•In-principle limit will be sanctioned for a period of 3 years with a provision for
automatic renewal.

• Gold Card holders would be given preference in the matter of granting of

packing credit in foreign currency. Time limit for disposal of applications: Fresh
proposals: 25 days, renewals: 15 days and ad hoc limits: 7 days.

Stand-by limits: A limit of not less than 20% of the assessed limit may be made
available to facilitate urgent credit needs for executing sudden order.

Rate of interest: Concessional rate on post-shipment rupee credit, may be for a

max period up to 365 days.

For loans against FCNR-B funds in foreign currency, preference to them.

Export Declaration Forms

Exporters have to declare for all exports before the Customs authority, full export
value of the goods (earlier exports were exempted from declaration up to $
25000) w.e.f.1.10.13. For export of goods, the declaration (in duplicate), is before
the Commissioner of Customs. Duplicate copy is given to exporter, who submits it
to Customs along with cargo. After certifying the quantity for shipment, this
duplicate is returned to exporters for submitting to AD at the time of negotiation.
In case of software export, the declaration is before the Designated Official of

5
Pre-Promotion Training Material 2021 Indian Overseas Bank, Staff College
Ministry of Information Technology in triplicate. Presently there are 4 types of
export declaration fom1s in use, as under

Form Where to use/ where to submit/No. of copies

Export Declaration Exports are made otherwise than by post and Custom Office is not computerized
Form (EDF) (i.e. where EDI facility is not available). Prepared in duplicate. Submitted to
(earlier GR) Commissioner of Customs.
SDF Form It has been dispensed with as requirement s u b s u m e d in shipping bill (RBI 14.05.15).
Earlier it was used when exports were made otherwise than by post and Custom Office
has EDI facility.
EDF (earlier pp When exports a r e made to any c o u n t r y by post parcel. Prepared in
Form) Duplicate. Submitted to AD Bank.
VP/COD form When exports are made by post parcel under arrangements to realise
proceeds through postal channels on value payable or cash delivery basis.
SOFTEX Form In case of e x p o r t of c o mp ut er software in non-physically form. Prepared in
Triplicate. Submitted to Ministry of IT (GOI).
The Entire Process is now subsumed in EPDMS portal.

IMPORTS

• Proof of import: Exchange Control copy of the Bill of Entry (BEF), Postal Appraisal
Form or Customs Assessment Certificate, etc. to be submitted to AD for import
payment, if the amount is above USD 100000. (BEF replaced by Integrated
Declaration w.e.f 01.04.16 being part of IDPMS)

• BEF Statement: For delayed I non-submission of proof of import for 6 months or

more, HY report for June & Dec to be submitted by banks, to RBI within 15 days.
(merged in IDPMS in 2016)

• Remittances for usance imports are to be completed within 6 months from date
of shipment. During COVID 19, period extended upto 12 months for imports made
till 31.07.2020.

• Advance remittance for services up to USD 5 lac without any counter guarantee
from International Bank can be made.

• Advance remittance for goods up to USD 5 million without any counter

guarantee from International Bank can be made.

• Advance payment for Merchant Trade Transactions up to USD 200000.

• Crystallization: Import bills: If drawn under LC and is not retired within 10 days,
account of importer is to be debited on 10th day (as per FEDAI rules).

6
Pre-Promotion Training Material 2021 Indian Overseas Bank, Staff College
• Application form for import payments: Form A-1 when the amount of payment
is above US $5000 (raised from USD500). Plain paper up to $5000. Form A-1 has
been discontinued in May 15.

• Payment of import bills directly received by importers: Normal importers-

$300000, Status holders no ceiling, non-status holder of rough diamonds and
rough precious and semi-precious stones upto-$ 300000.

• ADs can approve trade credit or open LC or issue BG, LoC, LoU up to USD 20
million for capital goods import period 1-3 year (5 years in infrastructure). Now
LOC, LOU can’t be issued by any bank but ehey can issue Foreign Guarantees.

• Importers can book forward contract for purchase under Past Performance
Route up to 100% of eligible limit i.e. 3-yr actual import turnover

Important Forex Returns

Name Period Objective

R-Return Fortnightly on 15th Transactions in various currencies.
and last, within 7 Consolidated bank wise return only.
days
xos HY - Jun & Dec Outstanding export bills > 6 months.
within 15 days Submission wef Dec 15 discontinued as
information is monitored in EDPMS.
BEF HY - Jun & Dec Imports in respect of which documentary
within 15 proof has not been submitted by the importer.
EBW HY - Jun & Dec Export Bills written of
within 15
NRO·CSR Monthly Non-resident deposits comprehensive single
return on NR/FCNR deposits and their
transactions in a month
(STAT-5) & STAT 8 merged in this and
discontinued from March 2015.
BAL Fortnightly Foreign Currency authorised dealers and
rupee balance of non-resident banks.
ECB-2 Monthly External Commercial Borrowings
GPB Daily Gaps, Positions & Balances (GBP) : Gaps of
foreign currency, net open exchange
positions and cash balances.

7
Pre-Promotion Training Material 2021 Indian Overseas Bank, Staff College