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Market News
Review exporter caution-listing: RBI Panel.
Aug 04, 2023
The age-old mechanism of placing exporters who fail to bring in foreign exchange in time on the 'caution list' may be examined.
An internal working group of the Reserve Bank of India (RBI) has recommended rationalisation of the caution-listing process, two persons told ET.
The going gets tougher for exporters who find themselves on such a list as local banks, processing the trade documents, typically insisting on either arranging advance payment from overseas buyers or an irrevocable letter of credit from the latter's bank.
If the RBI accepts the recommendations, industry circles are hoping that there may be a carve-out for cases up to a certain threshold level of exports, or where exporters are faced with genuine hurdles in obtaining payment - for instance, an overseas buyer facing liquidation or bankruptcy.
'A shipping bill may remain open on account of a variety of genuine reasons. For instance, there may be short remittances due to the deduction of bank charges or post-shipment discounts offered by the exporter, or reconciliation errors in exports made under long-term contracts. Besides, there could be automatic deductions by foreign online marketplaces towards warehousing charges, service fees, commissions, ad fees, etc. After recommendation by the authorised dealer bank for caution-listing, RBI should grant an opportunity of hearing to the exporter before inclusion in the caution-list,' said Harshal Bhuta, Partner, PR Bhuta & Co, a CA firm.
For such mismatches, exporters end up receiving notices from the Enforcement Directorate. A rationalisation of caution-listing would exclude some of these cases and save exporters from dealing with the ED.
Last year, there were cases where the Directorate had asked companies to submit a string of information on businesses and key persons as well as old data - including local and offshore bank accounts, identities of directors, and former directors as well as their nature of association with the company along with residential addresses.
Exporters have to realise earnings within nine months from the date of export. After this, they may get extensions from the bank for up to three years with each extension not exceeding six months.
An exporter is caution-listed by RBI based on the recommendations of the bank which looks into the exporter's track record and possible run-ins with investigative agencies. The system of automatic caution listing based on the information in the export data processing and monitoring system (EDPMS) was discontinued by RBI in October 2020 to give relief to exporters hit by the pandemic. Earlier exporters were automatically caution-listed if any shipping bill against them remained outstanding for more than two years in the EDPMS platform and no extension was granted.
'The ED has been verifying many pending cases of parties which have received (or remitted) part of the money for export (or import) of goods but did not complete the actual shipments. These exporters and importers follow up with the respective authorised dealer to knock off the bill of lading with advance funds received and bill entry with advance money remitted. Many times a single transaction is outstanding on both sides. The department checks whether all documents have been properly submitted,' said Rajesh Shah, partner, Jatyantilal Thakkar and Company.
ED springs into action as pending receivables or payables create a suspicion of possible money laundering. Some of the companies, which received the recent notices, face the hardship of compiling details of all exports and imports since their inception: date of remittance (from the overseas buyer), name of the remitter (or the identity of the overseas buyer), currency of payment, amount in foreign currency, the equivalent in rupees, date of export, shipping bill number, whether export-related documents were submitted to the bank, and the balance amount in case of partial shipment of export.
economictimes.indiatimes.com
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