Compliance & Risk Management Final

["250 6.3.3 Trade Credits Framework (a) Basic Approach: Trade Credits (TC) refer to the credits extended by the overseas supplier, bank, financial institution and other permitted recognised lenders for prescribed maturity, for imports of capital\/non-capital goods. Depending on the source of finance, such TCs include suppliers\u2019 credit and buyers\u2019 credit. (b) Salient Features of the Trade Credit Framework: TC for imports into India can be raised in \u2013 (i) any freely convertible foreign currency (FCY denominated TC) or (ii) Indian Rupee (INR denominated TC). A. Common Parameters for both FCY denominated TC and INR denominated TC 1)\t Forms of TC - Buyers\u2019 Credit and Suppliers\u2019 Credit 2)\t Eligible borrower - Person resident in India acting as an importer 3)\t Ceiling Amount per Import Transaction under automatic route - For oil\/gas refining & marketing, airline and shipping companies - Up to USD 150 million or equivalent. For others - Up to USD 50 million or equivalent. 4)\t Recognised lenders \u2013 i)\t For suppliers\u2019 credit: Supplier of goods located outside India. ii)\t For buyers\u2019 credit: Banks, financial institutions, foreign equity holder(s) located outside India and financial institutions in IFSCs located in India. iii)\t Participation of Indian banks and NBFCs (operating from IFSCs) as lenders is subject to the RBI prudential guidelines. Foreign branches\/ subsidiaries of Indian banks are permitted as recognised lenders only for FCY TC. 5)\t Period of TC - The period of TC, reckoned from the date of shipment, shall be - For capital goods \u2013 up to 3 years; For non-capital goods - up to one year or the operating cycle whichever is less. For shipyards \/ shipbuilders - up to 3 years. B. FCY denominated TC 1)\t All-in-cost ceiling per annum - For existing TCs linked to LIBOR whose benchmarks are changed to ARR: Benchmark Rate plus 350 bps spread. For new TCs: Benchmark rate plus 300 bps spread. 2)\t Exchange rate - Change of FCY TC into INR TC can be at the exchange rate prevailing on the date of the agreement for such change or at a lower exchange rate, if consented to by the TC lender. 3)\t Hedging provision - To follow the sectoral\/ prudential guidelines for hedging.","251 4)\t Change of currency of borrowing - Change from one freely convertible foreign currency to any other freely convertible foreign currency as well as to INR is freely permitted. C. INR denominated TC 1)\t All-in-cost ceiling per annum - Benchmark rate plus 250 bps spread. 2)\t Exchange rate - For conversion to Rupee, exchange rate shall be the rate prevailing on the date of settlement. 3)\t Hedging provision - The overseas investors are eligible to hedge their exposure in Rupee through (a) permitted derivative products with AD banks in India; (b) branches\/ subsidiaries of Indian banks abroad; or (c) branches of foreign banks with Indian presence on a back to back basis. 4)\t Change of currency of borrowing - Change of currency from INR to any freely convertible foreign currency is not permitted. (c) Trade Credits in SEZ\/FTWZ\/DTA: 1)\t TC can be raised by a unit or a developer in a SEZ including FTWZ for purchase of non-capital and capital goods within an SEZ including FTWZ or from a different SEZ including FTWZ. 2)\t An entity in DTA is also allowed to raise TC for purchase of capital \/ non-capital goods from a unit or a developer of a SEZ including FTWZ. 3)\t Date of transfer of ownership of goods will be treated as TC date. The inter unit receipt generated through NSDL can be treated as an import document. (d) Security for Trade Credit: 1)\t AD banks\/ foreign banks\/ overseas branches of Indian banks may give bank guarantees on behalf of the importer in favour of overseas lender. 2)\t The importer may offer security of movable assets (including financial assets)\/ immovable assets (excluding land in SEZs)\/ corporate or personal guarantee for raising trade credit. (e) Reporting Requirement: 1)\t Monthly reporting: AD banks should report details of TCs like drawal, utilisation, and repayment of TC approved by all its branches, in a consolidated statement, during a month. Each TC may be given a unique identification number by the AD bank. 2)\t Quarterly reporting: AD banks are also required to furnish data on issuance of bank guarantees for TCs by all its branches, in a consolidated statement, at quarterly intervals on the XBRL platform.","252 (f) Role of AD bank: 1)\t While the primarily responsibility of ensuring adherence to the TC policy lies with the importer, the ADs are also expected to ensure compliance with applicable parameters of the trade credit policy \/ provisions of Foreign Exchange Management Act, 1999 by their constituents. 2)\t ADs should ensure that there is no double financing on account of these transactions between a unit or a developer in a SEZ including FTWZ for purchase of non-capital and capital goods within an SEZ including FTWZ or from a different SEZ including FTWZ. 3)\t ADs should ensure that for import of non-capital goods, the period of TC, as applicable, is lower of operating cycle or one year (three years for shipyards \/ shipbuilders). 6.4 Exports of Goods & Services 6.4.1 General (a) General Aspects i.\t Export trade is regulated by the Directorate General of Foreign Trade (DGFT). Policies and procedures for exports from India are announced by the DGFT. ii.\t AD Category \u2013 I banks may conduct export transactions in conformity with the Foreign Trade Policy and the Rules framed by the Government of India and the Directions issued by RBI. iii.\t AD banks are permitted to issue guarantees on account of exports subject to specified conditions. iv.\t Export contracts and invoices may be denominated in freely convertible currency or Indian rupees but export proceeds shall be realized in freely convertible currency. Export proceeds against specific exports may also be realized in rupees, provided it is through a freely convertible Vostro account of a non-resident bank situated in any country other than a member country of Asian Clearing Union or Nepal or Bhutan. In July, 2022, Reserve Bank of India has suggested the AD Banks to develop a system of settlement of international trade transactions in INR. v.\t \u201cFinancial Year\u201d (April to March) is the time base for all trade transactions related issues. (b) Realization and repatriation of proceeds of export of goods\/ software\/ services i.\t The exporter should realize and repatriate the full value of goods\/ software\/ services to India within 9 months from the date of export.","253 ii.\t For goods exported to a warehouse established outside India, the proceeds shall be realized within 15 months from the date of shipment. (c) Manner of receipt and payment i.\t The value of the goods exported shall be received through an AD Bank. ii.\t For goods sold to overseas buyers during their visits EDF (duplicate) should be released by the AD banks \u2013 (a) on receipt of funds in their Nostro account, or (b) on the exporter producing a certificate from the Credit Card servicing bank in India that it has received the equivalent amount in foreign exchange, or (c) AD bank has received payment by debit to the credit card of an importer where the reimbursement from the card issuing bank\/ organization will be received in foreign exchange. iii.\t Repatriation of proceeds of export of goods\/ services of value up to USD 10,000 is permitted under arrangements with Online Payment Gateway Service Providers (OPGSPs) subject to specified conditions. A start-up can realise the receivables of its overseas subsidiary and repatriate them through OPGSPs. iv.\t Settlement System under ACU Mechanism a)\t Asian Monetary Unit (AMU) is denominated as \u2018ACU Dollar\u2019, \u2018ACU Euro\u2019 and \u2018ACU Yen\u2019 - equivalent in value to one US Dollar, one Euro and one Japanese Yen, respectively. In the Asian Clearing Union (ACU), participants can settle their transactions either in ACU Dollar or in ACU Euro or in ACU Japanese Yen. b)\t AD banks can open and maintain ACU Dollar, ACU Euro and ACU Japanese Yen accounts with their correspondent banks in other participating countries. All eligible payments are required to be settled by the concerned banks through these accounts. c)\t Relaxation from ACU Mechanism (Indo-Myanmar Trade) - Trade transactions with Myanmar can be settled in any freely convertible currency in addition to the ACU mechanism. d)\t All eligible current account transactions including trade transactions with Iran should be settled in any permitted currency outside the ACU mechanism, until further notice. e)\t All eligible current account transactions including trade transactions with Sri Lanka may be settled in any permitted currency outside the ACU mechanism with effect from July 08, 2022, until further notice. f)\t Nostro accounts of the commercial banks of the ACU member countries, can be used for settling the payments of both exports and imports of goods and services among the ACU countries.","254 g)\t Operations in \u2018ACU Euro\u2019 have been temporarily suspended with effect from July 01, 2016. v.\t Third party payments for export \/ import transactions a)\t Third party payments for export \/ import transactions are allowed, subject to prescribed conditions. b)\t Firm irrevocable order backed by a tripartite agreement should be in place, unless where documentary evidence for circumstances leading to third party payments\/ name of the third party being mentioned in the irrevocable order\/ invoice has been produced. vi.\t Settlement of Export transactions in currencies not having a direct exchange rate \t AD Category-I banks may permit settlement of those export transactions (except those put through the ACU mechanism) where the invoicing is in a freely convertible currency and the settlement takes place in the currency of the beneficiary, which though convertible, does not have a direct exchange rate, subject to prescribed conditions. vii.\t International Trade Settlement in Indian Rupees (INR) a)\t In order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in INR, with effect from July 11, 2022 an additional arrangement has been put in place for invoicing, payment, and settlement of exports\/ imports in INR. For this mechanism prior approval is required from the Foreign Exchange Department of RBI, Central Office. b)\t The broad framework for cross border trade transactions in INRis as follows: (i)\t All exports and imports may be denominated and invoiced in INR. (ii)\t Exchange rate between the currencies of partner countries may be market determined. (iii)\t The settlement of trade transactions shall be in INR as per the prescribe dprocedure. c)\t AD banks in India are permitted to open Rupee Vostro Accounts. For settlement of trade transactions with any country, AD bank in India may open Special Rupee Vostro Accounts of correspondent bank\/s of the partner trading country. For settlement of international trade transactions through this arrangement: (i)\t Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller \/supplier.","255 (ii)\t Indian exporters undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country. d)\t The export \/ import undertaken and settled shall be subject to usual documentation and reporting requirements. Letter of Credit (LC) and other trade related documentation may be decided mutually between banks of the partner trading countries under the overall framework of UCPDC and Incoterms. Exchange of messages in safe, secure, and efficient way may be agreed mutually between the banks of partner countries. e)\t Indian exporters may receive advance payment against exports from overseas importers in Indian rupees. Before allowing this, Indian banks shall ensure that available funds in these accounts are first used towards payment obligations arising out of already executed export orders\/ export payments in the pipeline. The said permission would be in accordance with the conditions mentioned for Receipt of advance against exports under Master Direction on Export of Goods and Services 2016. In order to ensure that the advance is released only as per the instructions of the overseas importer, the Indian bank maintaining the Special Vostro account of its correspondent bank shall, apart from usual due diligence measures, verify the claim of the exporter with the advice received from the correspondent bank before releasing the advance. f)\t \u2018Set-off\u2019 of export receivables against import payables in respect of the same overseas buyer and supplier with facility to make\/ receive payment of the balance of export receivables\/ import payables, if any, through this mechanism may be allowed, subject to the conditions mentioned for Set-off of export receivables against import payables under Master Direction on Export of Goods and Services 2016. g)\t Issue of Bank Guarantee for trade transactions, undertaken through this arrangement, is permitted subject to adherence to provisions of FEMA Notification No. 8 and the provisions of Master Direction on Guarantees & Co-acceptances. h)\t The Rupee surplus balance held may be used for permissible capital and current account transactions in accordance with mutual agreement. The balance in Special Vostro Accounts can be used for: (i)\t Payments for projects and investments. (ii)\t Export\/Import advance flow management","256 (iii)\t Investment in Govt. Treasury Bills, Govt. securities, etc. as per extant guidelines and prescribed limits, subject to FEMA and similar statutory provision. i)\t Reporting of cross- border transactions need to be done in terms of the extant guidelines under FEMA 1999. j)\t The bank of a partner country may approach an AD bank in India for opening of Special INR VOSTRO account. The AD bank will seek approval from RBI with details of the arrangement. AD bank maintaining the special Vostro Account shall ensure that the correspondent bank is not from a country or jurisdiction in the updated FATF Public Statement on High Risk & Non Co-operative Jurisdictions on which FATF has called for counter measures. (d) Foreign Currency Accounts 1)\t Foreign Currency Account - Foreign currency accounts are permitted to be maintained in India or abroad in following cases: a)\t Participants in international exhibition\/trade fair \u2013 temporary foreign currency account abroad. The balance in the account is repatriated to India through normal banking channels within a period of one month from the date of closure of the exhibition\/trade fair. b)\t Exporters having good track record - FCA with AD banks in India and outside India. c)\t Overseas office\/branch of Indian entity - FCA with a bank outside India. d)\t Unit located in a SEZ - FCA with an AD bank in India. e)\t A project \/ service exporter (resident in India) foreign currency account with a bank outside or in India. 2)\t Diamond Dollar Account (DDA) a)\t Eligible persons: Firms and companies \u2013 (a) dealing in purchase\/ sale of rough or cut and polished diamonds \/ precious metal jewellery plain, minakari and\/ or studded with \/ without diamond and\/ or other stones, (b) with a track record of at least 2 years in import \/ export of diamonds \/ colored gemstones \/ diamond and colored gemstones studded jewellery \/ plain gold jewellery and (c) having an average annual turnover of Rs. 3 crore or above during the preceding three licensing years (licensing year is from April to March) b)\t Not more than five Diamond Dollar Accounts are permitted per customer. c)\t Other conditions - As in case of EEFC Accounts.","257 3)\t Exchange Earners\u2019 Foreign Currency Account (EEFC Account) a)\t Eligible person: A person resident in India being a foreign exchange earner. b)\t Joint Holder: Resident close relative(s) (as per Companies Act 2013) permitted on former or survivor basis. c)\t Nature of Account: Non-interest bearing current account. No credit facilities, either fund-based or non-fund based, permitted against the security of balances held. d)\t Credits: 100% of foreign exchange earnings of the holder, subject to the condition that i)\t The 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 utilization of the balances for approved purposes or forward commitments. ii)\t The facility is intended to enable exchange earners to save on conversion\/ transaction costs while undertaking forex transactions; and not to maintain assets in foreign currency. e)\t The eligible credits represent \u2013 i)\t inward remittance through normal banking channel, excluding the remittance \u2013 (i) received pursuant to any undertaking given to RBI, or (ii) which represents foreign currency loan raised or investment received from outside India, or (iii) those received for meeting specific obligations by the account holder. ii)\t payments received in foreign exchange by a 100% EOU or a unit in EPZ, STP or EHTP for supply of goods to similar such unit or to a unit in DTA, and also payments received in foreign exchange by a unit in DTA for supply of goods to a unit in SEZ; f)\t Exporter constituents can extend trade related loans\/ advances to overseas importers out of their EEFC balances without any ceiling subject to prescribed conditions. g)\t Exporters can repay packing credit advances from balances in EEFC account and\/ or Rupee resources to the extent exports have actually taken place. h)\t If a part of the export proceeds is credited to an EEFC account, the export declaration (duplicate) form may be suitably certified.","258 (e) Special Arrangements: 1)\t Counter-Trade Arrangement - Counter trade proposals involving adjustment of value of goods imported into India against value of goods exported from India in terms of an arrangement voluntarily entered into between the Indian party and the overseas party through an Escrow Account opened in India in US Dollar is considered by the RBI subject to prescribed conditions. 2)\t Exports to neighboring countries by road, rail or river - Filing original copies of EDF by the exporter\/ agent where exports are made to neighboring countries by road, rail or river transport: a.\t Exports by barges\/country craft\/road transport - The form should be presented at the Customs station at the border through which the vessel or vehicle has to pass before crossing over to the foreign territory. b.\t Exports by rail - Customs staff is posted at certain designated railway stations. They collect the EDF for goods loaded at these stations so that the goods may move straight on to the foreign country without further formalities at the border. For goods loaded at other stations, exporters must arrange to present EDF to the Customs Officer at the Border Land Customs Station. 3)\t Border trade with Myanmar - All trade transactions with Myanmar, including those at the Indo-Myanmar border shall be settled in any permitted currency in addition to the Asian Clearing Union mechanism. 4)\t Counter \u2013Trade arrangements with Romania - RBI will consider counter trade proposals from Indian exporters with Romania involving adjustment of value of exports from India against value of imports made into India in terms of a voluntarily entered arrangement between the concerned parties, subject to the condition, among others that the Indian exporter should utilize the funds for import of goods from Romania into India within six months from the date of credit to Escrow Accounts allowed to be opened. 5)\t Repayment of State credits - Export of goods and services against repayment of state credits granted by erstwhile USSR continue to be governed by the extant directions issued by the RBI. 6)\t Forfaiting - EXIM Bank and AD banks have been permitted to undertake forfaiting, for financing of export receivables. Remittance of commitment fee \/ service charges, etc., payable by the exporter as approved by the EXIM Bank \/ AD banks concerned may be done through an AD bank. Such remittances may be made in advance in one lump sum or at monthly intervals as approved. 7)\t Export factoring on non-recourse basis - AD banks are permitted to factor the export receivables on non-recourse basis.","259 a.\t The invoices purchased should represent genuine trade invoices. b.\t In case export financing has not been done by the Export Factor, the Export Factor may pass on the net value to the financing bank\/ Institution after realising the export proceeds. c.\t AD bank, being the Export Factor, should have an arrangement with the Import Factor for credit evaluation & collection of payment. In case of single factor, not involving Import Factor overseas, the Export Factor may obtain credit evaluation details from the correspondent bank abroad. d.\t Notation should be made on the invoice that importer has to make payment to the Import Factor. e.\t After factoring, the Export Factor may close the export bills and report the same in the EDPMS of RBI. f.\t KYC and due diligence on the exporter shall be ensured by the Export Factor. 8)\t Project Exports and Service Exports a.\t Export of engineering goods on deferred payment terms and execution of turnkey projects and civil construction contracts abroad are collectively referred to as \u2018Project Exports\u2019. b.\t Indian exporters are required to obtain the approval of the AD banks\/ Exim Bank at post-award stage before undertaking execution of such contracts. c.\t AD banks\/ Exim Bank may consider awarding post-award approvals without any monetary limit and permit subsequent changes in the terms of post award approval within the relevant FEMA guidelines \/ regulations. d.\t The respective AD bank \/ Exim Bank should monitor the projects for which post- award approval has been granted by them. e.\t Under mentioned facilities are provided to project & service exporters subject to certain specified conditions- i.\t Inter-Project transfer of machinery ii.\t Inter-Project transfer of funds. iii.\t Deployment of temporary cash surpluses iv.\t Repatriation of funds in case of On-site Software Contracts 9)\t Export of goods on lease, hire, etc. - Prior approval of the RBI is required for export of machinery, equipment, etc., on lease, hire basis under agreement with the overseas lessee against collection of lease rentals\/hire charges and ultimate re-import.","260 10)\t Export on elongated credit terms - Exporters intending to export goods on elongated credit terms may submit their proposals through AD banks to the RBI. 11)\t Export of Currency - Permission of RBI is required for any export of Indian currency except as follows: a.\t Any resident in India may take currency notes outside India (other than to Nepal and Bhutan) - Not exceeding Rs. 25,000; and b.\t Any person resident outside India, (but not being a citizen of Pakistan and Bangladesh and also not a traveler coming from and going to Pakistan or Bangladesh) and visiting India may take currency notes outside India - Not exceeding Rs. 25,000 while exiting only through an airport. 6.4.2 EDF \/ SOFTEX Procedure (a) Goods through Customs ports (Non-EDI): Customs certify the value and give running serial number on the two copies of Export Declaration Form (EDF) at Non- Electronic Data Interchange (EDI) port. Customs transmit the original EDF to the RBI and return the duplicate to the exporter. At the time of shipment, after examining the goods, Customs certify the quantity on the duplicate copy of EDF and return it to the exporter. Within 21 days from the date of export, the exporter shall lodge with the AD the duplicate copy of EDF and the relative shipping documents and an extra copy of the invoice to the AD named in the EDF, for negotiation or collection of export bills. The AD shall report the transaction through Export Data Processing and Monitoring System (EDPMS) to the RBI and retain the documents. For exports under deferred credit arrangement or to joint ventures abroad against equity participation or under rupee credit agreement, the number and date of the RBI approval\/ or reference of the relative RBI circular is recorded in the EDF. Copy of duplicate EDF duly certified by Customs may be accepted, if the duplicate copy is lost\/ misplaced\/ (b) Goods\/ software through EDI Ports: The shipping bill is submitted by the exporter, in duplicate, to the Commissioner of Customs or the SEZ, one copy of the shipping bill marked \u2018Exchange Control (EC) Copy\u2019 is returned after verification and authentication. for being submitted to the AD bank within 21 days from the date of export. The duplicate copy of the form together with a copy of invoice etc. shall be retained by ADs. Where data of shipping bill is integrated with EDPMS, requirement of submission of EC copy of shipping bill with the AD bank would not be there. (c) Goods through Post: EDF should be first presented by the exporter to an AD for countersignature. AD shall countersign EDF after ensuring that the parcel has been addressed to their branch or correspondent bank in the country of import. The exporter shall then submit the countersigned","261 EDF to the post office with the parcel. The duplicate copy of EDF is retained by the AD to whom the exporter shall submit relevant documents together with an extra copy of invoice for negotiation\/collection, within the prescribed period of 21 days. The concerned overseas branch or correspondent shall be instructed to deliver the parcel to consignee against payment or acceptance of relative bill. AD is permitted to countersign EDF covering parcels addressed direct to the consignees, provided: an irrevocable letter of credit for the full value of in favor of the exporter has been advised through the AD concerned; or full value has been received in advance; or AD is satisfied, on the basis of the standing and track record of the exporter and the arrangements made for realization of the export proceeds. The particulars of the related payments\/ basis should be recorded on the EDF. (d) Mid-sea trans-shipment of catch by deep sea fishing vessels: For mid-sea trans-shipment of catches by Indian owned vessels, the exporters may submit the EDF, duly signed by the Master of the vessel in lieu of Custom certification, indicating the composition of the catch, quantity, export value, date of shipment (date of transfer of catch), etc. duly supported by a certificate from an international cargo surveyor. The EDF, both original and duplicate, should indicate the number and date of Letter of Permit issued by Ministry of Agriculture for operation of the vessel. The exporter will submit to the Customs the EDF in duplicate at the registered port of the vessel or any other port. EDF (Original) is retained by the Customs for capturing data in Customs\u2019 EDI. Customs will give their running serial number on both the copies of EDF and will return the duplicate copy to the exporter as the value certification of the export has already been done. (e) SOFTEX Forms: The exporter should submit declaration in Form SOFTEX in quadruplicate in respect of export of computer software and audio \/ video \/ television software to the designated official concerned of the Government of India at STPI \/ EPZ \/FTZ \/SEZ for valuation \/ certification not later than 30 days from the date of invoice\/ the date of last invoice raised in a month, as indicated above. The designated officials may also certify the SOFTEX Forms of EOUs, which are registered with them. (f) Citing of specific identification numbers: In all applications \/ correspondence with the RBI, the specific identification number as available on the EDF and SOFTEX forms should invariably be cited. (g) Export of Services: The exporter may export services (for which no forms have been specified) without furnishing any declaration, but shall be liable to realise the amount of foreign exchange which becomes due or accrues on account of such export, and to repatriate the same to India.","262 (h) Third party export proceeds: Realization of export proceeds in respect of export of goods \/ software from third party should be duly declared by the exporter in the appropriate declaration form. (i) Short Shipments and Shut out Shipments: i.\t When part of a shipment covered by an EDF already filed with Customs is short- shipped, the exporter must give notice of short-shipment to the Customs and obtain certified copy. ii.\t Where a shipment has been entirely shut out and there is delay in making arrangements to re-ship, the exporter will give notice in duplicate to the Customs, attaching thereto the unused duplicate copy of EDF and the shipping bill. The Customs will verify that the shipment was actually shut out, certify the copy of the notice as correct and forward it to the RBI together with unused duplicate copy of the EDF. In this case, the original EDF received earlier from Customs will be cancelled. If the shipment is made subsequently, a fresh set of EDF should be completed. (j) Consolidation of air cargo\/sea cargo: i.\t Consolidation of air cargo - Where air cargo is shipped under consolidation, the airline company\u2019s Master Airway Bill will be issued to the Consolidating Cargo Agent. The Cargo agent in turn will issue his own House Airway Bills (HAWBs) to individual shippers. AD banks may negotiate HAWBs only if the relative letter of credit specifically provides for negotiation of these documents in lieu of Airway Bills issued by the airline company. ii.\t Consolidation of sea cargo - AD banks may accept Forwarder\u2019s Cargo Receipts (FCR) issued by IATA approved agents, in lieu of bills of lading, in respect of export transactions backed by letters of credit, if the relative letter of credit specifically provides for negotiation of this document, in lieu of bill of lading. Similarly, ADs may, at their discretion, accept FCR where export transactions are not backed by letters of credit, provided the \u2018relative sale contract\u2019 with overseas buyer provides for acceptance of FCR. The bank should satisfy itself about the bona fides of the transaction and the track record of the overseas buyer and the Indian supplier. 6.4.3 Obligations of Authorised Dealers (a) Grant of EDF waiver: AD banks may consider requests for grant of EDF waiver - Status holders are entitled to export freely exportable items (excluding Gems and Jewellery, Articles of Gold and precious metals) on free of cost basis for export promotion subject to specified annual limits for different cases. These supplies are not entitled to Duty Drawback or any other export","263 incentive. Exports of goods not involving any foreign exchange transaction directly or indirectly requires the waiver of EDF procedure. (b) Receipt of advance against exports: i.\t On receiving advance payment (with or without interest), from a buyer outside India, the exporter has to ensure that (a) the shipment of goods is made within one year from the date of receipt of advance payment; (b) the rate of interest, if any, payable on the advance payment does not exceed LIBOR + 100 basis points; and (c) the documents are routed through the AD bank through whom the advance payment is received. Any remittance towards refund of unutilized portion of advance payment or towards payment of interest, to be made after the expiry of the said period of one year, requires the prior approval of the RBI. ii.\t AD banks have to report all the inward remittances including advance remittances, received for export of goods\/ software in EDPMS. Also, AD banks need to report in EDPMS the electronic FIRCs issued against inward remittances. iii.\t AD banks can allow exporters having a minimum of three years\u2019 satisfactory track record to receive long term export advance up to a maximum tenor of 10 years to be utilized for execution of long term supply contracts for export of goods subject to the prescribed conditions. iv.\t AD banks may allow exporters to receive advance payment for export of goods which would take more than one year to manufacture and ship and where the \u2018export agreement\u2019 provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment subject to prescribed conditions. v.\t Follow-up with exporters for making exports: a)\t AD banks need to follow up with the concerned exporters in order to ensure that export performance are completed within the stipulated time period. b)\t AD banks should exercise proper due diligence and ensure compliance with KYC and AML guidelines so that only bonafide export advances flow into India. Doubtful cases as also instances of chronic defaulters may be referred to Directorate of Enforcement (DoE) for further investigation. A quarterly statement indicating details of such cases may be forwarded to the concerned Regional Offices of RBI within 21 days from the end of each quarter.","264 (c) EDF Approval for Trade Fair\/Exhibitions abroad: Firms\/ Companies and other organizations participating in Trade Fair\/Exhibition abroad can take\/export goods for exhibition and sale outside India without the prior approval of the RBI. Unsold exhibit items may be sold outside the exhibition\/ trade fair in the same country or in a third country. Such sales at discounted value are also permissible. It would also be permissible to \u2018gift\u2019 unsold goods up to the value of USD 5000 per exporter, per exhibition\/ trade fair. AD banks may approve EDF of export items for display or display-cum-sale in trade fairs\/exhibitions outside India subject to prescribed conditions. (d) EDF approval for export of goods for re-imports: i.\t AD banks may consider request from exporters for granting EDF approval in cases where 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. ii.\t Where the goods being exported for testing are destroyed during testing, AD banks may obtain a certificate issued by the testing agency that the goods have been destroyed during testing. (e) Re-export of unsold rough diamonds from Special Notified Zone of Customs without Export Declaration Form (EDF) formality: The unsold rough diamonds, when re-exported from the SNZ (being an area within the Customs) without entering the DTA, do not require any EDF formality. Entry of consignment containing different lots of rough diamonds into the SNZ should be accompanied by a declaration of notional value by way of an invoice and a packing list indicating the free cost nature of the consignment. Under no circumstance, entry of such rough diamonds is permitted into DTA. For the lot\/ lots cleared at the center\/s Bill of Entry shall be filed by the buyer. AD bank may permit such import payments after being satisfied with the bona-fides of the transaction. Further, AD bank shall also maintain a record of such transactions. (f) Setting up of Offices abroad and acquisition of immovable property for Overseas Offices: At the time of setting up of the office, AD banks may allow remittances towards initial expenses up to 15% of the average annual sales\/income or turnover during the last two financial years or up to 25% of the net worth, whichever is higher. For recurring expenses, remittances up to 10% of the average annual sales\/income or turnover during the last two financial years may be sent for the purpose of normal business operations of the office (trading\/non-trading)\/branch or representative office outside India subject to the prescribed terms and conditions.","265 (g) Operational Aspects \u2013 Export Transactions: 1)\t Delay in submission of shipping documents by exporters \t AD banks may handle the export documents presented after the prescribed period of 21 days from date of export, without prior approval of the RBI, provided they are satisfied with the reasons for the delay. 2)\t Return of documents to exporters \t The duplicate copies of EDF and shipping documents, submitted to the AD banks should not ordinarily be returned to exporters, except for rectification of errors and resubmission. 3)\t Landlocked countries \t AD banks may deliver one negotiable copy of the Bill of Lading to the Master of the carrying vessel or trade representative for exports to certain landlocked countries if the shipment is covered by an irrevocable letter of credit and the documents conform strictly to the terms of the Letter of Credit which, inter alia, provides for such delivery. 4)\t Direct dispatch of documents by the exporter i)\t AD banks should normally dispatch shipping documents to their overseas branches\/correspondents. However, these may be sent direct to the consignees or their agents resident in the country of final destination of goods, where either an advance payment or an LC for full value has been received, or the exporter is a regular customer with good standing and record. ii)\t AD banks may permit \u2018Status Holder Exporters\u2019, and units in SEZ to dispatch the export documents to the consignees outside India subject to the prescribed conditions. 5)\t Part Drawings\/ Undrawn Balances \t In certain lines of export trade, 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., This is ascertained after inspection, weighment or analysis of the goods. AD banks may negotiate such bills, subject to certain conditions. 6)\t Consignment Exports i)\t For goods exported on consignment basis, the AD bank, while forwarding shipping documents to his overseas branch\/ correspondent, should instruct the latter to deliver them only against trust receipt\/undertaking to deliver sale proceeds by a specified date within the prescribed period for realization of proceeds of the export.","266 ii)\t The agents\/consignees may deduct from sale proceeds of the goods expenses normally incurred towards receipt, storage and sale of the goods, such as landing charges, warehouse rent, handling charges, etc. and remit the net proceeds to the exporter. iii)\t The account sales received from the Agent\/Consignee should be verified by the AD banks. Deductions in Account Sales should be supported by bills\/receipts in original except in case of petty items like postage\/cable charges, stamp duty, etc. iv)\t In case the goods are exported on consignment basis, freight and marine insurance must be arranged in India. v)\t AD banks may allow the exporters to abandon the books, which remain unsold at the expiry of the period of the sale contract. Accordingly, the exporters may show the value of the unsold books as deduction from the export proceeds in the Account Sales. 7)\t Opening \/ hiring of warehouses abroad \t AD banks may consider applications from exporters and grant permission for opening\/ hiring warehouses abroad subject to prescribed conditions. 8)\t Reduction in invoice value on account of prepayment of usance bills \t Occasionally, exporters may approach AD banks for reduction in invoice value on account of cash discount to overseas buyers for prepayment of the usance bills. AD banks may allow cash discount to the extent of amount of proportionate interest on the unexpired period of usance, calculated at the rate of interest stipulated in the export contract or at the prime rate\/LIBOR of the currency of invoice where rate of interest is not stipulated in the contract. 9)\t Reduction in invoice value in other cases \t If, after a bill has been negotiated or sent for collection, its amount is to be reduced for any reason, AD banks may approve such reduction, if satisfied about genuineness of the request, subject to prescribed framework and conditions. 10)\t Change of buyer\/consignee \t Prior approval of the RBI is not required if, after goods have been shipped, they are to be transferred to a buyer other than the original buyer in the event of default by the latter, provided any reduction in value does not exceed 25% of the invoice value and any the realization of export proceeds is not beyond 9 months from the date of export. If reduction in value exceeds 25%, the conditions stipulated for such cases should be satisfied.","267 11)\t Export of goods by Special Economic Zones (SEZs) \t Units in SEZs can undertake job work abroad and export goods from that country itself subject to prescribed conditions. AD banks may permit units in DTAs to purchase foreign exchange for payments for goods\/ services supplied to them by units in SEZs. It must be ensured that the Letter of Approval (LoA) issued by the Development Commissioner (DC) of the SEZ, includes a provision for such transactions. 12)\t Extension of time \t AD banks have been permitted to extend the period of realization of export proceeds beyond the stipulated period, for up to six months, at a time, irrespective of the value of the export, subject to prescribed conditions. Other cases would require RBI approval. 13)\t Export Bills Register \t AD banks should maintain Export Bills Register, in physical or electronic form aligned with EDPMS. Bill number should be given to all export transactions on a financial year basis (i.e. April to March) and reported in EDPMS. 14)\t Follow-up of overdue bills i)\t AD banks should closely watch realization of bills and follow-up promptly with the concerned exporters where bills remain outstanding, beyond the due date for payment. If proceeds are not realised within the stipulated period. or the exporter seeks extension of time beyond the stipulated period, the matter should be reported to the RBI stating, where possible, the reason for the delay in realizing the proceeds. ii)\t The duplicate copies of EDF\/SOFTEX Forms should, continue to be held by AD banks until the full proceeds are realized, except in case of undrawn balances. iii)\t AD banks should follow with exporters systematically and vigorously so that action against defaulting exporters does not get delayed. Any laxity in the follow up of realization of export proceeds by AD banks will be viewed seriously by the RBI. iv)\t Realization of all export transactions should be reported in EDPMS.","268 15)\t Shipments lost in transit i)\t When shipments for which payment has not been received are lost in transit, the AD banks must ensure that insurance claim is made as soon as the loss is known. ii)\t If the claim is payable abroad, the AD banks must arrange to collect the full amount of claim due on the lost shipment, through their overseas branch\/correspondent and release the duplicate copy of EDF only after the amount has been collected. iii)\t A certificate for the claim amount received should be furnished on the reverse of the duplicate copy. iv)\t AD banks should ensure that claim amounts partially settled abroad, directly by shipping companies\/airlines under carrier\u2019s liability, are repatriated to India. 16)\t Export claims \t AD banks may allow to remit export claims, provided the related export proceeds have already been realized and repatriated to India and the exporter is not on the caution list of the RBI. The exporter should be advised to surrender proportionate export incentives, if any, received by him. 17)\t \u201cWrite-off\u201d of unrealized export bills i)\t An exporter who has not been able to realize the outstanding export dues despite best efforts, may either self-write off or approach the AD banks, who had handled the relevant shipping documents, with appropriate supporting documentary evidence. Write-offs are permissible within prescribed limits and subject to meeting the prescribed conditions. ii)\t The following cases do not qualify for the \u201cwrite-off\u201d facility: (a)\t Exports to countries with externalization problem (i.e. where the overseas buyer has deposited the value of export in local currency but repatriation has not been permitted by the Central Bank\/ authorities). (b)\t EDF\/Softex under investigation by agencies like, Enforcement Directorate, Directorate of Revenue Intelligence, Central Bureau of Investigation, etc. and the outstanding bills which are subject matter of civil \/ criminal suit. iii)\t AD banks shall report write-off of export bills in EDPMS. 18)\t Write off \u2013 where claims have been paid by ECGC and private insurance companies regulated by IRDA","269 \t AD banks shall, on application from the exporter with documentary evidence of the claims settled by the ECGC\/ insurance companies regulated by IRDA, write off the relative export bills in EDPMS. The claims settled in rupees by ECGC\/ private insurance companies should not be construed as export realization in foreign exchange. 19)\t Set-off of export receivables against import payables \t AD banks may deal with the following requests from their Exporter\/Importer constituents for allowing set-off of outstanding export receivables against outstanding import payables, subject to the prescribe conditions. i)\t Set-off of export receivables against import payables of the same overseas buyer\/ supplier. ii)\t Set-off of export receivables against import payables with overseas group\/ associate companies (on net basis or gross basis) through an in-house or outsourced centralized settlement arrangement. 20)\t Netting-off of export receivables against import payments \u2013 Units in SEZs \t AD banks may allow requests for \u2018netting off\u2019 of export receivables against import payments for units located in SEZ subject to prescribed conditions. (h) Exporters\u2019 Caution List: a)\t An exporter is caution-listed by the RBI based on the recommendations of the AD bank concerned, depending upon the exporters track record with the AD bank and investigative agencies. b)\t AD Bank should refer to the RBI, if the exporter has come to the adverse notice of the ED\/ CBI\/ DRI\/any such other law enforcement agency, and\/or the exporter is not traceable, and\/or the exporter is not making sincere efforts to realise the export proceeds. c)\t The AD bank may recommend to RBI for de-caution-listing an exporter. d)\t AD banks should follow specified procedure and conditions while handling shipping documents for caution listed exporters. No shipping document should be handled for cases that do not meet the requirements. e)\t AD banks should obtain prior approval of RBI for issuing guarantees for caution- listed exporters.","270 (i) Issue of Guarantees by an Authorised Dealer a)\t An AD may give guarantee in respect of any debt, obligation or other liability incurred by an exporter resident in India, in respect of exports from India, and owed to a person resident outside India, b)\t An AD may give a guarantee in respect of any debt, obligation or other liability incurred by a person resident outside India, in the following cases: (1)\t these are owed to a person resident in India in connection with a bonafide trade transaction, and if it is covered by a counter - guarantee of a bank of international repute resident broad; (2)\t as a counter-guarantee to cover guarantee issued by its branch\/ correspondent outside India, on behalf of Indian exporter, where guarantees of only resident banks are acceptable to overseas buyers. (j) Issuance of Electronic Bank Realisation Certificate (eBRC) AD banks are required to update the EDPMS with data of export proceeds on \u201cas and when realised basis\u201d and, generate from it Electronic Bank Realisation Certificate (eBRC). 6.4.4 Remittances connected with Export (a)\t Agency commission on exports: (i)\t AD banks may allow payment of commission, either by remittance or by deduction from invoice value, on application by the exporter, subject to prescribed conditions. (ii)\t AD banks may allow payment of commission by Indian exporters, for exports covered under counter trade arrangement through Escrow Accounts (designated in US Dollar), subject to prescribed conditions. (b)\t Refund of export proceeds: (i)\t AD banks, through whom the export proceeds were originally realized may consider requests for refund of export proceeds of goods exported from India and being re-imported into India on account of poor quality. While permitting such transactions, AD banks shall: (i) Exercise due diligence regarding the track record of the exporter; (ii) Verify the bona-fides of the transactions; (iii) Obtain from the exporter a certificate issued by DGFT \/ Custom authorities that no export incentive has been availed by the exporter against the relevant export or the proportionate incentives availed, if any, have been surrendered; (ii)\t AD banks may not insist on the requirement of re-import of goods, where exported goods have been auctioned or destroyed by the Port \/ Customs \/ Health authorities\/","271 any other accredited agency in the importing country subject to submission of satisfactory documentary evidence. In all other cases AD banks shall ensure that procedures as applicable to normal imports are adhered to and that an undertaking from the exporter, to re-import the goods within three months from the date of refund of export proceeds, shall be obtained. 6.5 Imports of Goods & Services 6.5.1 General i.\t Import trade is regulated by the Directorate General of Foreign Trade (DGFT). AD banks should ensure that the imports into India are in conformity with the Foreign Trade Policy in force and Foreign Exchange Management (Current Account Transactions) Rules, 2000 and the Directions issued by Reserve Bank under FEMA. ii.\t AD banks should follow normal banking procedures and adhere to the provisions of Uniform Customs and Practice for Documentary Credits (UCPDC), etc. while opening letters of credit for import into India on behalf of their constituents. iii.\t Compliance with the provisions of Research & Development Cess Act, 1986 may be ensured for import of drawings and designs. iv.\t AD banks may also advise importers to ensure compliance with the provisions of Income Tax Act, wherever applicable. 6.5.2 General Guidelines for Imports (a) Remittances for Import Payments: AD Banks may allow remittance for making payments for imports into India, after ensuring that all the requisite details are made available, and the remittance is for bona fide trade transactions as per applicable laws in force. (b) Import Licences: Except for goods included in the negative list which require licence under the Foreign Trade Policy in force, AD banks may freely open letters of credit and allow remittances for import. While opening letters of credit, the \u2018For Exchange Control purposes\u2019 copy of the licence should be called for and adherence to special conditions, if any, attached to such licences should be ensured. After effecting remittances under the licence, AD banks may preserve the copies of utilised licence \/s till they are verified by the internal auditors or inspectors. (c) Obligation of Purchaser of Foreign Exchange: 1)\t As per FEMA, any person acquiring foreign exchange is permitted to use it either for the purpose mentioned in the declaration made by him to an AD bank or for any other purpose for which acquisition of foreign exchange is permissible under the said Act or Rules or Regulations framed there under.","272 2)\t Where foreign exchange acquired has been utilised for import of goods into India, the AD bank should ensure that the importer furnishes evidence of import viz., as in IDPMS, Postal Appraisal Form or Customs Assessment Certificate, etc., and satisfy himself that goods equivalent to the value of remittance have been imported. 3)\t A person resident in India may make payment for import of goods in foreign exchange through an international card held by him\/in rupees from international credit card\/ debit card through the credit\/debit card servicing bank in India or as prescribed by RBI. 4)\t Any person resident in India may also make payment as under: a)\t In rupees towards meeting expenses related to travel to India of a person resident outside India; b)\t By means of a crossed cheque or a draft for purchase of gold or silver in any form imported by such person in accordance with the related laws\/ regulations, etc.; c)\t A company or resident in India may make payment in rupees (of the amounts due as sitting fees or commission or remuneration, and expenses related to travel to India) to its non-whole time director who is resident outside India and is on a visit to India for the company\u2019s work, subject to meeting the requirements of applicable laws\/ regulations. d)\t Time Limit for Settlement of Import Payments: i)\t Time limit for Normal Imports (1)\t Remittances against imports should be completed no later than six months from the date of shipment, except in cases where amounts are withheld towards guarantee of performance, etc. (2)\t AD banks may permit settlement of import dues delayed due to disputes, financial difficulties, etc. However, interest payment can be permitted only for a period of up to three years from the date of shipment. ii)\t Time limit for Deferred Payment Arrangements \t Any deferred payment arrangements (including suppliers\u2019 and buyers\u2019 credit) entered into, for up to 3 years in case of import of capital goods and up to 1 year or the operating cycle whichever is less, in case of import of non-capital goods, shall be treated as trade credits for which the procedural guidelines as laid down in the Master Direction on External Commercial Borrowings, Trade Credits and Structured Obligations (updated from time to time) may be followed.","273 iii)\t Time Limit for Import of Books \t Remittances against import of books may be allowed without restriction as to the time limit. Payment of any interest to be as per the provisions for the same. iv)\t Extension of Time (1)\t AD banks are permitted to grant extension of time for settlement of import dues up to a period of six months at a time (maximum up to the period of three years) for delays on account of disputes about quantity or quality or non-fulfillment of terms of contract; financial difficulties and where importer has filed suit against the seller. Sector specific guidelines of RBI for extension of time (i.e. rough, cut and polished diamonds) are applicable. (2)\t While granting extension of time, AD banks are required to look into specified aspects and ensure that the prescribed requirements are met. (3)\t Cases beyond the limits or not covered may be referred to the RBI. (4)\t Extension of time should be noted in the IDPMS. 6.5.3 Import of Foreign exchange \/ Indian Rupees: (a) Permission of RBI for Currency Import: General or special permission of the RBI, is required to import or bring into India, any foreign currency. RBI may allow a person to bring into India, Indian currency notes, subject to prescribed conditions. (b) Import of Foreign Exchange into India: a)\t A person may send into India, without limit, foreign exchange in any form other than currency notes, bank notes and travellers cheques. b)\t A person may bring into India from any place outside India, without limit, foreign exchange (other than unissued notes). On arrival in India, a declaration is to be given to the Custom Authorities at the Airport in the Currency Declaration Form (CDF), where the aggregate value of the foreign exchange in the form of currency notes, bank notes or travellers cheques at any one time exceeds USD 10,000 or its equivalent, and\/or the aggregate value of foreign currency notes (cash portion) alone exceeds USD 5,000 or its equivalent.","274 c)\t Import of Indian Currency and Currency Notes: i.\t A person resident in India returning from a temporary visit out of India, may bring (other than when returning from Nepal and Bhutan), Indian currency notes up to an amount not exceeding Rs. 25,000. ii.\t A person may bring from Nepal or Bhutan, Indian currency notes for any amount in denominations up to Rs.100\/-. 6.5.4 Import Transactions \u2013 Other Aspects (a) Third Party Payment for Import Transactions: AD banks are allowed to make payments to a third party for import of goods, subject to prescribed conditions. (b) Issue of Guarantees by an Authorised Dealer: An AD may give guarantees for the following types of transactions. i.\t For any debt, obligation or other liability incurred, in respect of import on deferred payment terms (as per RBI approval for such terms), by an importer resident in India and owed to a person resident outside India. ii.\t For any debt, obligation or other liability incurred by a person resident in India and owed to a person resident outside India (being an overseas supplier of goods, bank or a financial institution), for import of goods subject to conditions specified by RBI. It may be in the form of Letter of Undertaking of Letter of Comfort. iii.\t On behalf of a resident service importer, in favour of a non-resident service provider, subject to prescribed conditions. A guarantee for an amount exceeding USD 500,000 or its equivalent cannot be issued, except on behalf of Public Sector Company or a Department \/ Undertaking of the Government of India \/ State Government. Where the service importer is a Public Sector Company or a Department \/ Undertaking of the Government of India \/ State Government, prior approval of the Ministry of Finance, Government of India is required for a guarantee of more than USD 100,000 or its equivalent. iv.\t An AD may permit a person resident in India to issue corporate guarantee in favour of an overseas lessor for financing import through operating lease. 6.5.5 Operational Guidelines for Imports (a) Advance Remittance: 1)\t Advance Remittance for Import of Goods a)\t AD bank may allow advance remittance for import of goods without any ceiling subject to the following conditions:","275 i)\t Amount exceeds USD 200,000 or its equivalent: To obtain 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 bank in India, issued against the counter-guarantee of an international bank of repute situated outside India. ii)\t Amount up to USD 5,000,000 or its equivalent: May not insist upon a BG\/ Standby LC, 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. iii)\t A Public Sector Company or a Department\/Undertaking of the Government of India \/ State Government\/s not in a position to obtain a guarantee from an international bank of repute against an advance payment, is required to obtain a specific waiver for the bank guarantee from the Ministry of Finance, Government of India before making advance remittance exceeding USD 100,000. b)\t All payments towards advance remittance for imports are subject to the specified conditions and AD banks should create Outward Remittance Message (ORM) in IDPMS and follow other extant IDPMS guidelines. 2)\t Advance Remittance for Import of Rough Diamonds a)\t AD banks are permitted to take decision on overseas mining companies to whom an importer (other than Public Sector Company or Department \/ Undertaking of Government of India \/ State Government) can make advance payments, without any limit \/ bank guarantee\/ stand-by letter of Credit, subject to their ensuring the prescribed requirements and conditions. b)\t For an importer entity in the Public Sector or a Department \/ Undertaking of the Government of India \/ State Government\/s, AD banks may permit the advance remittance subject to the specified conditions and a specific waiver of bank guarantee from the Ministry of Finance, Government of India, if the advance payments is equivalent to or exceeds USD 100,000\/-. 3)\t Entries to be made in IDPMS \t Based on the AD code declared by the importer, the banks shall download the Bill of Entry (BOE) issued by EDI ports from \u201cBOE Master\u201d in IDPMS. For non-EDI ports, AD banks of the importer shall upload the BoE data in IDPMS as per message format \u201cManual BoE reporting\u201d on daily basis on receipt of BoE from the customer\/Customs Office. AD banks will enter BOE details and mark off ORMs as per the message format","276 \u201cBOE Settlement\u201d. In case of payment after receipt of BoE, the AD bank shall generate ORM for import payments made by the importer customer as per the message format \u201cBOE Settlement\u201d. Multiple ORMs can be settled against single BoE and also multiple BoEs can be settled against one ORM. 4)\t Advance Remittance for Import of Aircrafts\/Helicopters and other Aviation Related Purchases (Sector specific Relaxation) a)\t Entities permitted to import aircrafts and helicopters (including used\/second hand aircraft and helicopters) or person who has been granted permission to operate Scheduled or Non-Scheduled Air Transport Service (including Air Taxi Services) - AD banks may allow advance remittance, without obtaining a bank guarantee or an unconditional, irrevocable Standby Letter of Credit, up to USD 50 million, for direct import of each aircraft, helicopter and other aviation related purchases. b)\t Advance remittances for aircraft, helicopter or other aviation related purchases, whether under specific measure or under general provision, are subject to certain prescribed conditions that AD banks should ensure. 5)\t Advance Remittance for the Import of Services \t AD bank may allow advance remittance for import of services without any ceiling subject prescribed conditions. For amount exceeding USD 500,000 or its equivalent, a guarantee from a bank of international repute situated outside India, or a guarantee from an AD bank in India, issued against the counter-guarantee of a bank of international repute situated outside India, should be obtained from the overseas beneficiary. In the case of a Public Sector Company or a Department\/ Undertaking of the Government of India\/ State Governments, approval from the Ministry of Finance, Government of India is required for advance remittance for import of services without bank guarantee for an amount exceeding USD 100,000 or its equivalent. AD banks should also follow- up to ensure that the beneficiary of the advance remittance fulfils his obligation failing which, the amount should be repatriated to India. AD banks should ensure generation of ORMs and marking off in the IDPMS etc. (b) Interest on Import Bills: i.\t AD bank may allow payment of interest on usance bills or overdue interest on delayed payments for a period of less than three years from the date of shipment at the rate prescribed for trade credit from time to time. ii.\t In case of pre-payment of usance import bills, remittances may be made only after reducing the proportionate interest for the unexpired portion of usance at the rate at which interest has been claimed or LIBOR\/ any other widely accepted\/Alternative reference rate of the currency in which the goods have been invoiced, whichever is","277 applicable. Where interest is not separately claimed or expressly indicated, remittances may be allowed after deducting the proportionate interest for the unexpired portion of usance at LIBOR\/any other widely accepted\/Alternative reference rate of the currency of invoice. iii.\t In case of change in value due to interest effect the respective AD bank should ensure proper remark\/indicator is entered for ORM mark off in IDPMS etc. (c) Remittances against Replacement Imports: Where goods are short-supplied, damaged, short-landed or lost in transit and the Exchange Control Copy of the import licence has already been utilised to cover the opening of a letter of credit against the original goods which have been lost, the original endorsement to the extent of the value of the lost goods may be cancelled by the AD bank and fresh remittance for replacement imports may be permitted without reference to RBI, provided, the insurance claim relating to the lost goods has been settled in favour of the importer. The consignment being replaced should be shipped within the validity period of the license. AD bank should ensure that proper remark\/indicator is entered for ORM mark off\/closure of Bills in IDPMS etc. (d) Guarantee for Replacement Import: If replacement goods for defective import are being sent by the overseas supplier before the defective goods imported earlier are reshipped out of India, AD banks may issue guarantees for dispatch\/return of the defective goods. (e) Import of Equipment by Business Process Outsourcing (BPO) Companies for their overseas sites: AD banks may allow BPO companies in India to make remittances towards the cost of equipment to be imported and installed at their overseas sites in connection with the setting up of their International Call Centres (ICCs) subject to prescribed conditions. (f) Receipt of Import Bills\/ Documents: Concerned AD banks should ensure generation of ORMs, BoE entries and BoE settlement with the respective ORMs. 1)\t Receipt of import documents by the importer directly from overseas suppliers \t Import bills and documents should be received from the banker of the supplier by the banker of the importer in India. AD bank should not, therefore, make remittances where import bills have been received directly by the importers from the overseas supplier, except in the following cases: a)\t Where the value of import bill does not exceed USD 300,000.","278 b)\t Import bills received by wholly-owned Indian subsidiaries of foreign companies from their principals. c)\t Import bills received by Status Holder Exporters as defined in the Foreign Trade Policy, 100% Export Oriented Units \/ Units in Special Economic Zones, Public Sector Undertakings and Limited Companies. d)\t Import bills received by all limited companies viz. public limited, deemed public limited and private limited companies. 2)\t Receipt of import documents by the importer directly from overseas suppliers in case of specified sectors \t AD banks are permitted to allow remittance for imports by non-status holder importers up to USD 300,000 where the importer of rough diamonds, rough precious and semi- precious stones has received the import bills \/ documents directly from the overseas supplier and the documentary evidence for import is submitted by the importer at the time of remittance. Status holder importers dealing in the import of rough diamonds, rough precious and semi- precious stones can receive import bills directly from the suppliers without any ceiling. AD banks may undertake such transactions subject to the prescribed conditions. 3)\t Receipt of import documents by the AD bank directly from overseas suppliers \t At the request of importer clients, AD bank may receive bills directly from the overseas supplier, provided the AD bank is fully satisfied about the financial standing\/status and track record of the importer customer. AD bank should obtain a report on each individual overseas supplier from the overseas banker or a reputed overseas credit agency. (g) Evidence of Import: (i) Physical Imports \u2013 1)\t In case of all imports, irrespective of the value of foreign exchange remitted\/ paid for import into India, it is obligatory on the part of the AD bank through which the relative remittance was made, to ensure that the importer submits: a)\t BoE number, port code and date for marking evidence of import under IDPMS. b)\t Customs Assessment Certificate or Postal Appraisal Form, or Courier Bill of Entry as evidence that the goods for which the payment was made have actually been imported into India, or c)\t For goods imported and stored in Free Trade Warehousing Zone (FTWZ) or SEZ Unit warehouses or Customs bonded warehouses, etc., - the Exchange Control","279 Copy of the Ex-Bond Bill of Entry or Bill of Entry issued by Customs Authorities by any other name, the importer shall submit applicable BoE number, port code and date for marking evidence of import under IDPMS. 2)\t For imports on Delivery against acceptance basis - AD bank shall verify the evidence of import from IDPMS when effecting remittance. If importers do not produce documentary evidence due to genuine reasons (non- arrival of consignment, delay in delivery\/ customs clearance of consignment, etc.,), if satisfied with the genuineness of request, AD bank may allow reasonable time, not exceeding three months from the date of remittance, to submit the evidence of import. 3)\t AD banks are required to create Outward Remittance Message (ORM) for all such outward remittances irrespective of value and shall perform the subsequent activity viz document submission, outward remittance data, matching with ORM, closing of transactions etc.. (ii) Evidence of Import in Lieu of Bill of Entry 1)\t AD bank may accept, in lieu of Exchange Control Copy of Bill of Entry for home consumption, a certificate from the Chief Executive Officer (CEO) or auditor of the company that the goods for which remittance was made have actually been imported into India for remittances of less than USD 1,000,000 or its equivalent by importing entities satisfying certain specified criterion. 2)\t Outward Remittance Message has to be created and BoE downloaded from \u201cBoE Master \u201cin IDPMS (in case of EDI ports). In case of Non-EDI ports, duplicate copy\/ customs certified copy have to be submitted or BoE waiver obtained from RBI. (iii) Non-physical Imports 1)\t For imports in non-physical form, i.e., software or data through internet \/ dotcom channels and drawings and designs through e-mail \/ fax \u2013 To obtain a certificate from a Chartered Accountant that the software \/ data \/ drawing\/ design has been received. 6.5.6 Import Data Processing and Monitoring System: (a) Outward Remittance Message: To create Outward Remittance Message (ORM) for all outward remittance\/s for import payments for which the prescribed documents for evidence of import have not been submitted.","280 (b) Settlement of ORM with BoE: i.\t To download the Bill of Entry (BoE) issued by EDI ports from \u201cBOE Master\u201d in IDPMS, based on the AD Code (declared by the importer). For non-EDI ports, AD bank of the importer shall upload the BoE data in IDPMS as per message format \u201cManual BOE reporting\u201d on daily basis on receipt of BoE from the customer\/ Customs office. ii.\t Submission of hardcopy of evidence of import documents i.e., BoE Exchange Control copy has been discontinued with effect from December 1, 2016. The revised procedure is as under: iii.\t AD banks shall enter BoE details (BoE number, port code and date) for ORM associated with the advance payments for import transactions as per the message format \u201cBOE settlement\u201d. iv.\t In case of payment after receipt of BoE, the AD bank shall generate ORM for import payments as per the message format \u201cBOE settlement\u201d. v.\t Multiple ORMs can be settled against single BoE and also multiple BoE can be settled against one ORM. vi.\t On settlement of ORM with evidence of import in all cases issue an acknowledgement slip to the importer containing \u2013 a) importer\u2019s full name and address with code number; b) number and date of BoE and the amount of import; and c) a recap advice on number and amount of BoE and ORM not settled for the importer. vii.\t The importer needs to preserve the printed \u2018Importer copy\u2019 of BoE as evidence of import and acknowledgement slip for future use. (c) Extension and Write Off: i.\t Extension for submission of BoE, given by AD banks, will be reported in IDPMS as per the message \u201cBill of Entry Extension\u201d along with the date up to which extension is granted. ii.\t AD banks can consider closure of BoE\/ORM in IDPMS that involves write off to the extent of 5% of invoice value in cases where the amount declared in BoE varies from the actual remittance due to operational reasons and AD bank is satisfied with the reason\/s submitted by the importer. iii.\t AD banks may close the BoE for such import transactions where write off is on account of - quality issues; short shipment or destruction of goods by the port \/ Customs \/ health authorities subject to submission of satisfactory documentation irrespective of the amount involved. AD Bank shall settle and close ORM\/BoE with appropriate \u201cAdjustment Indicator\u201d in IDPMS.","281 iv.\t While allowing write off, AD banks must ensure that: the case is not the subject matter of any pending civil or criminal suit; the importer has not come to the adverse notice of the ED or the CBI or any such other law enforcement agency; and there is a system in place under which internal inspectors or auditors of the AD banks (including external auditors) should carry out random sample check\/ percentage check of write-off of import bills; v.\t Extension and write off cases not covered by the guidelines should be referred to the RBI. vi.\t The extant instructions and guidelines for Evidence of Import in Lieu of Bill of Entry will apply mutatis mutandis. The evidence of import in lieu of BoE in permitted\/ approved conditions will be created and uploaded in the form of BoE data as per message format \u201cManual BOE reporting\u201d in IDPMS. (d) Follow-up for Evidence of Import: AD banks should follow up for outward remittance made for import (i.e. unsettled ORM). Where relevant evidence of import data is not available on due dates should follow up for submission of documentary evidence of import. Similarly, if BoE data is not settled against ORM within the prescribed period should follow up with the importer. 6.5.7 Verification and Follow-up (a) Verification and Preservation: Internal inspectors and IS auditors (including external auditors) should carry out verification of following aspects of the bank - i.\t Verification and IS audit and assurance of the \u201cBOE Settlement\u201d process. Data and process followed should be preserved as per Cyber Security Framework in the bank. ii.\t Verification of the documents evidencing import other than which are available in IDPMS, e.g. Exchange Control copies of Postal Appraisal Forms, or Customs Assessment Certificates, etc. These should be preserved for a period of one year from the date of their verification. For cases under investigation, documents, and\/or data, process may be destroyed only after obtaining clearance from the investigating agency concerned. (b) Follow up for Import Evidence: i.\t In case an importer does not furnish any documentary evidence of import, within 3 months from the date of remittance the bank should rigorously follow-up for the next 3 months, using various modes of communications. At least one communication with the importer in this regard is by registered letter. ii.\t In IDPMS, all outstanding import remittances, should be reported.","282 6.5.8 Imports of Specific Commodities (a) Import of Gold: Nominated banks and nominated agencies, as notified by DGFT, are permitted to import gold on consignment basis. In addition to the above, qualified jewellers as notified by International Financial Services Centres Authority (IFSCA) are permitted to import gold under specific ITC (HS) Codes through India International Bullion Exchange IFSC Limited (IIBX). All sale of gold domestically will, however, be against upfront payment. Nominated banks are free to grant gold metal loans. The import of gold coins and medallions is permitted. However, prohibition on sale of gold coins and medallions by banks continues pending further review. The Status Holder Exporters shall adhere to the guidelines contained in extant Foreign Trade Policy. Head Offices\/ International Banking Divisions of AD Category - I banks should submit following statements under XBRL system (a) Statement on half yearly basis (end March \/ end September), showing the quantity and value of gold imported by the nominated banks\/ agencies\/ qualified jewellers\/ EOUs\/ SEZs in Gem & Jewellery Sector, mode of payment- wise. (b) Statement on monthly basis showing the quantity and value of gold imports by the nominated agencies (other than the nominated banks)\/ EOUs\/ qualified jewellers\/ SEZs in Gem & Jewellery sector during the month under report as well as the cumulative position as at the end of the said month beginning from the 1st month of the FY. Both the statements shall be submitted, even if there is \u2018Nil\u2019 position, by the 10th of the following month \/ half year, to which it relates. (b) Import of Gold Jewellery Including Jewellery Made of Precious Metals or\/and Studded With Diamonds \/ Precious Stones \/Semi-precious: Suppliers\u2019 and Buyers\u2019 credit (trade credit) including the usance period of LC opened for import of gold in any form, including jewellery made of gold\/precious metals or\/and studded with diamonds\/semi- precious\/precious stones, should not exceed 90 days from the date of shipment. (c) Import of Gold by Qualified Jewellers as notified by IFSCA: (i)\t Resident Qualified Jewellers are allowed to import gold through IIBX or any other exchange approved by IFSCA and DGFT, Government of India, as follows: (a)\t AD banks may allow Qualified Jewellers to remit advance payments for 11 days for import of gold through IIBX in compliance to the extant Foreign Trade Policy and regulations issued under IFSC Act. AD banks shall ensure that advance remittance for such import through exchange\/s authorised by IFSCA shall be as per the terms of the sale contract or other document in the nature of an irrevocable purchase order in terms of IFSC Act and regulations made thereunder by IFSCA.","283 AD bank shall carry out all the due diligence and ensure the remittances sent are only for the bona fide import transactions through exchange\/s authorised by IFSCA. (b)\t The advance remittance for import of Gold should not be leveraged in what-so- ever form for importing Gold worth more than the advance remittance made. (c)\t In case the import of Gold through IFSCA authorised exchange, for which advance remittance has been made, does not materialise, or the advance remittance made for the purpose is more than the amount required, the unutilized advance remittance shall be remitted back to the same AD bank within the specified time limit of 11 days. (d)\t For gold imported through IIBX, QJ shall submit the Bill of Entry (or any other such applicable document issued\/approved by Customs Department for evidence of import), issued by Customs Authorities to the AD bank from where advance payment has been remitted. (e)\t All payments by Qualified Jewellers for imports of gold through IIBX, shall be made through exchange mechanism as approved by IFSCA in terms of IFSC Act and regulations. Any deviation from the extant guidelines for import of Gold through IIBX need to be approved in advance by IFSCA and other applicable and appropriate authority\/ies. (ii)\t IFSC Authority (IFSCA) will conduct all required due diligence on the exchange \u2013 IIBX including all other entities involved in enabling import of Gold by QJs in terms of the IFSCA regulations. IFSCA shall also put in place necessary system to ensure that the advance remittance received from QJs are solely for the purpose for import of gold through IIBX. (iii)\t AD bank shall ensure that: (a)\t All required documentation, custom duty related procedures and filing Bill of Entry (BoE) as evidence of import, etc. is complete for the import of gold by QJ within the specified applicable period. (b)\t Single\/ multiple ORMs created and matched with corresponding BoEs and closed appropriately in IDMPS. (c)\t the importer \u2013 that is QJs comply with the related extant instructions relating to imports under FEMA, 1999, FTDR Act 1992, Foreign Trade Policy and regulations of IFSCA. \t AD banks may frame their own internal guidelines to deal with such cases, with the approval of their Board of Directors.","284 (iv)\t Reporting requirement by AD banks (a)\t To create Outward Remittance Message (ORM) in IDPMS. (b)\t To report FETERS in terms of extant guidelines. (c)\t To report the import of gold through QJ in XBRL as prescribed. (d) Import of Other Precious Metals: i.\t Import of Platinum\/ Palladium\/ Rhodium\/ Silver\/ Rough, Cut & Polished Diamonds\/ Precious and Semi-precious Stones. \t Suppliers\u2019 and Buyers\u2019 Credit, including the usance period of Letters of Credit opened for import should not exceed 90 days from the date of shipment. However, Clean Credit given by a foreign supplier to its Indian customer\/ buyer, for import of rough, cut and polished diamonds, precious and semi-precious stones, may be permitted for a period not exceeding 180 days from the date of shipment. AD banks may allow extension of time in respect of such clean credit for import of rough, cut and polished diamonds, to a maximum period of 180 days beyond the prescribed period\/ due date; beyond which they may refer the cases to the RBI. Such extension by AD banks is subject to the prescribed conditions. ii.\t Import of Platinum \/ Silver on Unfixed Price Basis \t The nominated agency\/bank may allow import of platinum and silver, on outright purchase basis subject to the condition that although ownership of the same shall be passed on to the importers at the time of import itself, the price shall be fixed later as and when the importer sells to the user. 6.5.9 Other Import Transaction Modalities (a) Import Factoring: AD bank may enter into arrangements with international factoring companies of repute, preferably members of Factors Chain International, without the approval of RBI. (b) Merchanting Trade: AD banks may handle the Merchanting Trade Transactions (MTT) subject to RBI guidelines. 1)\t Basics of Merchanting Trade: a)\t Goods acquired shall not enter the Domestic Tariff Area. b)\t The state of goods acquired may be allowed some transformation subject to the AD bank being satisfied with the documentary evidence and bonafides of the transaction.","285 c)\t c). Permitted for the goods that are permitted for exports \/ imports under the prevailing Foreign Trade Policy (FTP). All rules, regulations and directions applicable to exports (except Export Declaration Form) and imports (except Bill of Entry) shall be complied with for the export leg and import leg respectively. d)\t The entire merchanting trade is to be routed through the same AD bank. The AD bank shall verify the documents like invoice, packing list, transport documents and insurance documents (if originals are not available, non-negotiable copies duly authenticated by the bank handling documents may be taken) and satisfy itself about the genuineness of the trade. The AD bank may, if satisfied, rely on online verification of Bill of Lading\/ Airway Bill on the website of International Maritime Bureau or Airline web check facilities. However, the AD bank shall ensure that the requisite details are made available \/retrievable at the time of Inspection\/Audit\/investigation of the transactions. e)\t The entire MTT shall be completed within an overall period of nine months and there shall not be any outlay of foreign exchange beyond four months. f)\t The commencement date of merchanting trade shall be the date of shipment\/ export leg receipt or import leg payment, whichever is first. The completion date shall be the date of shipment\/ export leg receipt or import leg payment, whichever is the last. 2)\t Funding of Merchanting Trade a)\t Short-term credit (suppliers\u2019 credit or buyers\u2019 credit) may be extended to the extent not backed by advance remittance for the export leg, including the discounting of export leg LC by the AD bank, as in the case of import transactions. Letter of Undertaking (LoU)\/ Letter of Comfort (LoC) shall not be issued for supplier\u2019s\/ buyer\u2019s credit. b)\t Any receipts for the export leg, prior to the payment for import leg, may be parked either in Exchange Earners Foreign Currency (EEFC) account or in an interest-bearing INR account till the import leg liability arises. It shall be strictly earmarked\/ lien-marked for the payment of import leg. No fund\/non-fund-based facilities shall be extended against these balances. The liability of the import leg, as soon as it arises, shall be extinguished out of these funds without any delay. c)\t Payment for import leg may also be allowed to be made out of the balances in EEFC account of the merchant trader. d)\t Merchanting traders may be allowed to make advance payment for the import leg on demand made by the overseas supplier. Any such advance payment for an import leg beyond USD 500,000\/- per transaction, shall be made against","286 Bank Guarantee\/ an unconditional, irrevocable standby Letter of Credit from an international bank of repute. e)\t Letter of Credit to the supplier for the import leg is permitted against confirmed export order, subject to other regulatory aspects. 3)\t Monitoring MTT Transactions: a)\t AD bank shall ensure one-to-one matching in case of each MTT and report defaults in any leg by the traders to the RBI. b)\t The merchanting traders shall be genuine traders of goods and not mere financial intermediaries. Confirmed orders must be received by them from the overseas buyers. AD banks shall satisfy themselves about the capabilities of the merchanting trader to perform the obligations under the order. The merchanting trade shall result in profit which shall be determined by subtracting import payments and related expenses from export proceeds for the specific MTT. c)\t Write-off of unrealized amount of export leg: AD bank may write-off the unrealized amount of export leg, without any ceiling, on the request made by the Merchanting trader, in the following circumstances, subject to prescribed conditions. i)\t MTT buyer is declared insolvent. ii)\t The goods exported have been auctioned or destroyed by the Port\/ Customs Health authorities in the importing country. iii)\t The unrealized amount represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organization. 4)\t MTT - Other Aspects i.\t Third Party payments \t Third party payments for export and import legs of the MTT are not allowed. ii.\t Payment of Agency Commission \t Agency commission is not allowed in MTTs. AD banks may allow payment of agency commission up to a reasonable extent under exceptional circumstances, subject to prescribed conditions. iii.\t AD bank may approach RBI for regularization of the MTT for deviation, if any, from the prescribed guidelines, and the MTT shall be closed only after receiving approval.","287 5)\t Merchanting trade to Nepal and Bhutan a)\t As Nepal and Bhutan are landlocked countries, there is a facility of transit trade whereby goods are imported from third countries by Nepal and Bhutan through India under the cover of Customs Transit Declarations in terms of the Government of India Treaty of Transit with these two countries. b)\t Goods consigned to the importers of Nepal and Bhutan from third countries under merchanting trade from India would qualify as traffic-in-transit. (c) Processing of import related payments through Online Payment Gateway Service Providers (OPGSPs) AD banks can offer facility of payment for imports of goods and software of value not exceeding USD 2,000 by entering into standing arrangements with the OPGSPs subject to prescribed conditions. (d) Settlement of Import transactions in currencies not having a direct exchange rate: Settlement of import transactions where the invoicing is in a freely convertible currency and the settlement takes place in the currency of the beneficiary, which though convertible, does not have a direct exchange rate, can be permitted by AD banks subject to prescribed conditions. 6.6 FOREX FACILITIES FOR INDIVIDUALS 6.6.1 Liberalised Remittance Scheme (LRS) (a) Basic Features of LRS: i.\t AD may freely allow remittances by resident individuals up to USD 2,50,000 per Financial Year (April-March) for any permitted current or capital account transaction or a combination of both. ii.\t The Scheme is available to all resident individuals including minors. For a minor, the natural guardian will complete the Form A2. iii.\t The Scheme is not available to corporates, partnership firms, HUF, Trusts, etc. iv.\t Remittances can be consolidated in respect of family members subject to individual family members complying with its terms and conditions. v.\t Clubbing is not permitted by other family members for capital account transactions, if they are not the co-owners\/co-partners of the overseas bank account\/investment\/ property. vi.\t A resident cannot gift to another resident, in foreign currency, for the credit of the latter\u2019s foreign currency account held abroad under LRS.","288 vii.\t All other transactions which are otherwise not permissible under FEMA and those in the nature of remittance for margins or margin calls to overseas exchanges\/ overseas counterparty are not allowed. viii.\t Release of foreign exchange exceeding USD 2,50,000 requires prior permission from the RBI. (b) Capital Account Transactions: Permissible capital account transactions under LRS are: i.\t Opening of foreign currency account abroad with a bank ii.\t acquisition of immovable property abroad, Overseas Direct Investment (ODI) and Overseas Portfolio Investment (OPI) (as per Foreign Exchange Management (Overseas Investment) Rules, 2022, Foreign Exchange Management (Overseas Investment) Regulations, 2022 and Foreign Exchange Management (Overseas Investment) Directions, 2022);. iii.\t Extending loans including loans in Indian Rupees to NRIs who are relatives (as per Companies Act, 2013) (c) Current Account Transactions: Within the prescribed limit per FY current account transactions as (specified under Para 1 of Schedule III of the FEMA Rules) are also included. (d) Limit on Remittances: The limit of USD 2,50,000 applies to the aggregate value of all the remittances made for different eligible purposes (both current account and capital account transactions) during a given financial year. Specific provisions in respect of different current account purposes for which foreign exchange can be availed by the resident individuals under LRS are stated below. Except where stated otherwise, the permissible amount for any specific purpose is USD 2,50,000 in a FY less the amount utilized for any other eligible purposes during the FY. (e) Current Account Transactions - Eligible Purposes: i.\t Private visits - The aggregate amount of foreign exchange for all the private visits during a financial year abroad should be within the ceiling. Visits to Nepal and Bhutan are not included for this purpose. All tour related expenses (including cost of rail\/road\/ water transportation; cost of Euro Rail; passes\/tickets, etc. outside India; and overseas hotel\/lodging expenses) shall be subsumed under the LRS limit. The tour operator may collect this amount either in Indian rupees or in foreign currency from the resident traveller.","289 ii.\t Gift\/donation \u2013 Gifts to persona residing outside India or donations to organizations outside India are covered in the Scheme. iii.\t Going abroad on employment \u2013 Foreign exchange can be drawn when going abroad for employment. iv.\t Emigration - \t Foreign exchange up to the amount prescribed by the country of emigration but not exceeding the ceiling under the Scheme is permitted. Remittance outside India in excess of this limit 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. v.\t Maintenance of close relatives abroad \u2013 Remittances towards maintenance of close relatives [\u2018relative\u2019 as defined in Section 2(77) of the Companies Act, 2013] living abroad are covered. vi.\t Business trip - Visits by individuals in connection with attending of an international conference, seminar, specialised training, apprentice training, etc., are treated as business visits. Remittances for such purposes are covered within the ceiling in a FY irrespective of the number of visits. If an employee is being deputed by an entity for any of the above and the expenses are borne by the latter, such expenses shall be treated as residual current account transactions outside LRS and may be permitted without any limit, subject to verifying the bonafides of the transaction. vii.\t Medical treatment abroad \u2013 These expenses are covered under the Scheme, and foreign exchange can be released without insisting on any estimate from a hospital\/ doctor within the ceiling. For amount exceeding the limit, foreign exchange may be released under general permission based on the estimate from the doctor in India or hospital\/ doctor abroad. For a person who has fallen sick after proceeding release of foreign exchange is permitted (without seeking prior approval of the RBI) for medical treatment outside India. In addition, an amount up to USD 250,000 per financial year is allowed to a person for accompanying as attendant to a patient going abroad for medical treatment\/check-up. viii.\t Facilities available to students for pursuing their studies abroad - Foreign exchange may be released under the Scheme for studies abroad without insisting on any estimate from the foreign University. However, remittances exceeding USD 2,50,000 may be allowed (without seeking prior approval of the RBI) based on the estimate received from the institution abroad.","290 (f) Remittances for Other Purposes: i.\t Remittances under the Scheme can be used for purchasing objects of art subject to the provisions of other applicable laws such as the extant Foreign Trade Policy of the Government of India. ii.\t The Scheme can be used for outward remittance in the form of a DD either in the resident individual\u2019s own name or in the name of beneficiary with whom he intends putting through the permissible transactions at the time of private visit abroad, against self-declaration of the remitter in the prescribed format. iii.\t 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 RBI. The foreign currency accounts may be used for putting through all transactions connected with or arising from remittances eligible under this Scheme. (g) Remittances to International Financial Services Centres (IFSCs) in India: Resident individuals can make remittances to IFSCs in India subject to following conditions: i.\t Permitted for making investments in securities in IFSCs, other than those issued by entities\/ companies resident (outside IFSC) in India. ii.\t Permitted for opening a non interest bearing Foreign Currency Account (FCA) in IFSC, for making the above permissible investments. iii.\t Not permitted to settle any domestic transactions with other residents through these FCAs. iv.\t Permitted for payment of fees to foreign universities or foreign institutions in IFSCs for pursuing courses in Financial Management, FinTech, Science, Technology, Engineering and Mathematics (these are now permitted activities in IFSCs). (These remittances will be under the head \u2018studies abroad\u2019.) (h) Restrictions\/ Prohibitions: i.\t Banks should not extend any kind of credit facilities to resident individuals to facilitate capital account remittances under the Scheme. ii.\t The Scheme is not available for remittances for any purpose specifically prohibited under Schedule I or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transaction) Rules. iii.\t The Scheme is not available for capital account remittances to countries identified by Financial Action Task Force (FATF) as non-co-operative countries and territories as available on FATF website www.fatf-gafi.org or as notified by the RBI.","291 iv.\t Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the RBI to the banks is also not permitted. (i) Documentation by the remitter: i.\t The individual has to designate a branch of an AD through which all the remittances under the Scheme will be made. ii.\t The individual has to furnish Form A2 for purchase of foreign exchange under LRS. iii.\t Permanent Account Number (PAN) of the remitter is mandatory to be furnished. (j) Accretions\/ Repatriation: Investor can retain, and reinvest the income earned on the investments made under LRS. The received\/ realised\/ unspent\/ unused foreign exchange, unless reinvested, shall be repatriated and surrendered to an authorised person within a period of 180 days from the date of such receipt\/ realisation\/ purchase\/ acquisition or date of return to India. An individual who has made overseas direct investment as per FEMA provisions, shall have to comply with the provisions contained in Foreign Exchange Management (Overseas Investment) Rules, 2022, Foreign Exchange Management (Overseas Investment) Regulations, 2022 and Foreign Exchange Management (Overseas Investment) Directions, 2022.. (k) Loans\/ Gifts to NRI\/ PIO \u2013 Close Relatives: 1)\t Facility to grant loan in rupees to NRI\/ PIO close relative \t Resident individual is permitted to lend to a Non-resident Indian (NRI)\/ Person of Indian Origin (PIO) close relative [\u2018relative\u2019 as defined in Section 2(77) of the Companies Act, 201311] by way of crossed cheque\/ electronic transfer subject to the following conditions: i)\t the loan is free of interest and the minimum maturity of the loan is one year; ii)\t the loan amount should be within the overall limit under the LRS. iii)\t the loan shall be utilized for meeting the borrower\u2019s personal requirements or for his own business purposes in India. iv)\t the loan shall not be utilized, either singly or in association with other person for any of the activities in which investment by persons resident outside India is prohibited, namely: (a) The business of chit fund, or (b) Nidhi Company, or (c) Agricultural or plantation activities or in real estate business, or construction of farm houses, or (d) Trading in Transferable Development Rights (TDRs). [Here, real estate business shall not include development of townships, construction of residential\/ commercial premises, roads or bridges.]","292 v)\t the loan amount should be credited to the NRO a\/c of the NRI \/ PIO. Credit of such loan amount may be treated as an eligible credit to NRO a\/c; vi)\t the loan amount shall not be remitted outside India; and vii)\t repayment of loan shall be made by way of inward remittances through normal banking channels or by debit to the Non-resident Ordinary (NRO)\/ Non-resident External (NRE)\/ Foreign Currency Non-resident (FCNR) account of the borrower or out of the sale proceeds of the shares or securities or immovable property against which such loan was granted. 2)\t Facility to give rupee gift to NRI\/ PIO close relative \t A resident individual can make a rupee gift to a NRI\/PIO who is a relative of the resident individual [\u2018relative\u2019 as defined in Section 2(77) of the Companies Act, 201312] by way of crossed cheque \/electronic transfer. The amount should be credited to the Non- Resident (Ordinary) Rupee Account (NRO) a\/c of the NRI\/ PIO and credit of such gift amount may be treated as an eligible credit to NRO a\/c. 6.6.2 Operational instructions to Authorised Persons (LRS) i.\t The RBI does not, generally, prescribe the documents which should be verified by the Authorised Persons while releasing foreign exchange for current account transactions. ii.\t Sub-section (5) of Section 10 of the FEMA, 1999 provides that an authorised person shall obtain from a person transacting in foreign exchange a declaration and to required information to be reasonably satisfied that the transaction will not involve and is not designed for the purpose of any contravention or evasion of the provisions of the FEMA or any rule, regulation, notification, direction or order issued there under. iii.\t AD should keep on record any information\/ documentation, on the basis of which the transaction was undertaken for verification by the RBI. iv.\t If the applicant refuses to comply with any requirement or makes unsatisfactory compliance therewith, the AD shall refuse, in writing, to undertake the transaction and shall, if he has reasons to believe that any contravention \/ evasion is contemplated by the person, report the matter to the RBI. v.\t It is mandatory for ADs to comply with the requirement of the tax laws for deduction of tax at source while allowing remittances to the non-residents, as applicable. vi.\t Capital account transactions under the Scheme should be permitted to the customers who have maintained the bank account with the bank for a minimum period of one year prior to the remittances. If the applicant is a new customer of the bank, AD in addition to due diligence on the opening, operation and maintenance of the account, should obtain bank statement (of the account with other bank) for the previous year to satisfy","293 themselves regarding the source of funds. If such a bank statement is not available, copies of the latest Income Tax Assessment Order or Return filed by the applicant may be obtained. vii.\t The AD should ensure that the payment is received out of funds belonging to the person seeking to make the remittances, by a cheque drawn on the applicant\u2019s bank account or by debit to his account or by Demand Draft \/ Pay Order. AD may also accept the payment through credit \/debit\/prepaid card of the card holder. viii.\tThe AD should certify that the remittance is not being made directly or indirectly by \/or to ineligible entities and that the remittances are made in accordance with the instructions contained herein. Marketing in India of schemes soliciting foreign currency deposits by foreign entities, not having operational presence in India, raises supervisory concerns. Therefore, banks, including those not having an operational presence in India, should seek prior approval from RBI for the schemes to be marketed by them in India to residents either for soliciting foreign currency deposits for their foreign\/overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company. 6.6.3 Accounts for Non-Residents\/ NRIs in India (a) Definitions: i.\t \u2018Authorised Bank\u2019 is a bank including a co-operative bank authorised by the Reserve Bank to maintain an account of a person resident outside India. ii.\t\u2018Deposit\u2019 includes deposit of money with a bank, company, proprietary concern, partnership firm, corporate body, trust or any other person. iii.\t A \u2018Non-resident Indian\u2019 (NRI) is a person resident outside India who is a citizen of India. iv.\t A \u2018Person of Indian Origin (PIO)\u2019 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 the Central Government, satisfying the following conditions: a.\t Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act,1955 (57 of 1955); or b.\t Who belonged to a territory that became part of India after the 15th day of August, 1947; or c.\t 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.\t 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)","294 Explanation: PIO will include an \u2018Overseas Citizen of India\u2019 cardholder within the meaning of Section 7(A) of the Citizenship Act, 1955. v.\t\u2018Permissible currency\u2019 is a foreign currency which is freely convertible. vi.\t\u2018Relative\u2019 means relative as defined in section 2(77) of the Companies Act, 2013. (b) Non-Resident (External) Rupee Account Scheme \u2013 (NRE Account): i.\t Non-resident Indians (NRIs) and Person of Indian Origin (PIOs) are permitted to open and maintain these accounts (in any form, e.g. savings, current, recurring or fixed deposit account etc.) with ADs and with banks (including cooperative banks) authorised by the Reserve Bank to maintain such accounts. ii.\t Joint accounts can be opened by two or more NRIs and\/or PIOs or by an NRI\/PIO with a resident relative(s) on \u2018former or survivor\u2019 basis. iii.\t Credits permitted: Interest accruing on the account, Inward remittance of Interest on investment, transfer from other NRE\/ FCNR(B) accounts, Maturity proceeds if such investments were made from this account or through inward remittance. iv.\t Debits allowed: Local disbursements, Transfer to other NRE\/ FCNR(B) accounts and investments in India, Outward remittance. v.\t Current income like rent, dividend, pension, interest etc. is a permissible credit to the NRE account provided the credit represents current income of the NRI\/PIO account holder and income tax thereon has been deducted\/ paid\/ provided for, as the case may be. vi.\t Loans against the security of the funds held in NRE accounts: Permitted for the account holder, For third party in India, subject to the usual margin requirements. The loan cannot be repatriated outside India. \u201cLoan\u201d includes all types of fund based\/ non-fund based facilities. It shall be used for the following purposes: a)\t Personal purposes or for carrying on business activities except for the purpose of relending or carrying on agricultural\/ plantation activities or for investment in real estate business; b)\t Making direct investment in India on non-repatriation basis by way of contribution to the capital of Indian firms\/ companies; c)\t Acquiring flat\/ house in India for his own residential use. vii.\t Loans to a third party - there should be no direct or indirect foreign exchange consideration for the non-resident depositor agreeing to pledge his deposits to enable the resident individual\/ firm\/ company to obtain such facilities.","295 viii.\t Loan to the account holder - it can be repaid either by adjusting the deposits or through inward remittances from outside India through banking channels or out of balances held in the NRO account of the account holder. ix.\t AD may allow their branches\/ correspondents outside India to grant loans to or in favour of non-resident depositor or to third parties at the request of depositor for bona fide purpose against the security of funds held in the NRE accounts in India and also agree for remittance of the funds from India, if necessary, for liquidation of the outstanding. x.\t Facility for premature withdrawal of deposits will not be available where loans against such deposits are availed of. xi.\t NRE accounts should be designated as resident accounts or the funds held in these accounts may be transferred to the RFC accounts, at the option of the account holder, immediately upon the return of the account holder to India for taking up employment or on change in the residential status. xii.\t In the event of the demise of an account holder, balances in the account can be transferred to the non-resident nominee of the deceased account holder. However, request from a resident nominee for remittance of funds outside India for meeting the liabilities, if any, of the deceased account holder or for similar other purposes, should be forwarded to the Reserve Bank for consideration. xiii.\t Operations on an NRE account may be allowed in terms of Power of Attorney or other authority granted in favour of a resident by the non-resident account holder. The power of attorney can be given to the resident the joint account holder. xiv.\t The operations permitted by the PoA holder - Withdrawals for local payments or Remittance to the account holder himself through banking channels. If the non-resident is eligible to make investments in India, the PoA holder may be permitted to operate the account to facilitate such investment. xv.\t The resident PoA holder is not allowed to (a) Open a NRE account; (b) Repatriate outside India funds held in the account other than to the account holder himself; (c) Make payment by way of gift to a resident on behalf of the account holder; (d) Transfer funds from the account to another NRE account. xvi.\t Income from interest on balances standing to the credit of NRE Accounts is exempt from Income Tax. Likewise, balances held in such accounts are exempt from wealth tax. xvii.\tThe rate of interest and tenor applicable to these accounts will be in accordance with the directions\/ instructions.","296 (c) Foreign Currency (Non-resident) Account (Banks) Scheme \u2013 FCNR (B) Account: i.\t Non-resident Indians (NRIs) and Persons of Indian Origin (PIOs) are permitted to open and maintain these accounts with AD and banks authorised by the RBI to maintain such accounts. Deposits may be accepted in the form of fixed deposit and in any permissible currency. ii.\t Other conditions such as credits\/debits, joint accounts, loans \/ overdrafts, operation by power of attorney etc., as applicable to an NRE account are applicable to FCNR (B) account as well. iii.\t The rate of interest and tenor forthese accounts are in accordance with the directions\/ instructions. (d) Non-Resident (Ordinary) Account Scheme \u2013 NRO account: i.\t Any person resident outside India, may open and maintain NRO account with an AD or an Authorised Bank or a Post Office for the purpose of putting through bona fide transactions denominated in Indian Rupees. ii.\t NRO accounts may be maintained in any form, e.g. savings, current, recurring or fixed deposit account. NRIs and PIOs may hold an NRO account jointly with other NRIs and PIOs. They may be held jointly with residents on \u2018former of survivor\u2019 basis. iii.\t Permissible credits: Inward remittances from outside India, legitimate dues in India and transfers from other NRO accounts. Rupee gift\/ loan made by a resident to a NRI\/ PIO relative within the limits prescribed under the Liberalised Remittance Scheme may be credited to the latter\u2019s NRO account. iv.\t Permissible debits: Local payments, transfers to other NRO accounts or remittance of current income abroad. Apart from these, balances in the NRO account cannot be repatriated abroad except by NRIs and PIOs up to USD 1 million, subject to conditions specified. Funds can be transferred to NRE account within this USD 1 million facility. v.\t Loans against the deposits can be granted in India to the account holder or third party subject to usual norms and margin requirement. The loan amount shall not be used for relending, carrying on agricultural\/plantation activities or investment in real estate. vi.\t NRO accounts may be designated as resident accounts on the return of the account holder to India for any purpose indicating his intention to stay in India for an uncertain period. Likewise, when a resident Indian becomes a person resident outside India, his existing resident account should be designated as NRO account. vii.\t Power of Attorney may be granted in favour of a resident by the non-resident individual account holder for operations on the account restricted to local payments and remittances to non-residents.","297 (e) Conversion of Resident Account of Foreign Nationals: i.\t To facilitate the foreign nationals to collect their pending dues in India, AD Category-I banks may permit such foreign nationals to re-designate their resident account maintained in India as NRO account on leaving the country after their employment. ii.\t The bank should satisfy itself that the credit of amounts are bonafide dues of the account holder when she\/ he was a resident in India. iii.\t The funds credited to the NRO account should be repatriated abroad immediately, subject to payment of the applicable income tax and other taxes in India. The amount repatriated abroad should not exceed USD one million per financial year. The debit to the account should be only for the purpose of repatriation to the account holder\u2019s account maintained abroad. iv.\t The account should be closed immediately after all the dues have been received and repatriated as per the declaration made by the account holder when the account was designated as an NRO account. (f) Foreign National (Non-Indian Origin) visiting India: i.\t NRO (current\/ savings) account can be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India through banking channel or by sale of foreign exchange brought by him to India. ii.\t The balance in the NRO account may be paid to the account holder at the time of his departure from India provided the account has been maintained for a period not exceeding six months and the account has not been credited with any local funds, other than interest accrued thereon. (g) Opening of accounts by individuals\/ entities of certain countries: Opening of accounts by individuals\/ entities of Pakistan nationality\/ ownership and entities of Bangladesh ownership requires prior approval of the Reserve Bank. However, individuals of Bangladesh nationality may be allowed to open these accounts subject to the individual\/s holding a valid visa and valid residential permit issued by Foreigner Registration Office (FRO)\/ Foreigner Regional Registration Office (FRRO) concerned. (h) Opening of accounts for Citizens of Pakistan\/ Bangladesh belonging to the Minority Communities there i.\t AD may open only one Non-Resident Ordinary (NRO) Account for a citizen of Bangladesh or Pakistan, belonging to minority communities in those countries, namely Hindus, Sikhs, Buddhists, Jains, Parsis and Christians, residing in India and who has been granted a Long-Term Visa (LTV) by the Central Government.","298 ii.\t The account will be converted to a resident account once such a person becomes a citizen of India. iii.\t This account can also be opened if such person has applied for LTV which is under consideration of the Central Government, in which case the account will be opened for a period of six months and may be renewed at six monthly intervals subject to the condition that the individual holds a valid visa and valid residential permit issued by Foreigner Registration Office (FRO)\/ Foreigner Regional Registration Office (FRRO) concerned. iv.\t The opening of such NRO accounts will be subject to reporting of the details of accounts opened by the concerned Authorised bank to the Ministry of Home Affairs (MHA) on a quarterly basis. The report shall contain details of name\/s of the individual\/s; date of arrival in India; Passport No. and place\/country of issue; Residential Permit\/Long Term Visa reference and date & place of issue; name of the FRO\/ FRRO concerned; (vi) complete address and contact number of the branch where the bank account is being maintained. 6.6.4 Non Residents - Other Aspects (a) International Credit Cards: AD banks have been permitted to issue International Credit Cards to NRIs\/ PIOs, without prior approval of RBI. Such transactions may be settled by inward remittance or out of balances held in the cardholder\u2019s FCNR (B) \/ NRE \/ NRO Accounts. (b) Income-Tax: The remittances (net of applicable taxes) will be allowed to be made by the AD banks on production of requisite information in the formats prescribed by the Central Board of Direct Taxes, Ministry of Finance, Government of India from time to time. 6.7 OPERATIONS OF SUBSIDIARIES AND BRANCHES OF INDIAN BANKS AND ALL INDIA FINANCIAL INSTITUTIONS (AIFIS) IN FOREIGN JURISDICTIONS AND IN INTERNATIONAL FINANCIAL SERVICES CENTERS (IFSCS) - COMPLIANCE WITH STATUTORY\/REGULATORY NORMS RBI issued instructions on 1st December, 2022 to Indian banks and AIFIs on the issue of dealing in financial products, which are not specifically permitted in the Indian domestic market, by their branches\/subsidiaries operating outside India and also in the International Financial Services Centres (IFSCs) in India including Gujarat International Finance Tec- City (GIFT City). With these directions the foreign branches\/ foreign subsidiaries of Indian banks\/ AIFIs can deal in financial products, including structured financial products, which are not available","299 or are not permitted by the Reserve Bank in the domestic market, without prior approval of RBI, subject to compliance with conditions specified in the said RBI directions and those prescribed by the host regulator. The branches\/subsidiaries of Indian banks\/AIFIs operating in IFSCs (including GIFT City) may also deal in such financial products, including structured products, subject to compliance with all applicable laws\/ regulations and conditions in the said RBI directions and those prescribed by the host regulator. The financial products dealt with by the foreign branches and subsidiaries as well as those in IFSCs shall attract the prudential norms such as capital adequacy, exposure norms (including Large Exposure Framework), periodical valuation, and all other applicable norms. Parent bank shall adhere to more stringent among the host and home regulations in respect of prudential norms. In case the current RBI norms do not specify prudential treatment of certain financial product, the parent bank\/ AIFI shall seek specific guidance from RBI. 6.8 LET US SUM UP Foreign Direct Investment: A person resident outside India may hold foreign investment either as Foreign Direct Investment or as Foreign Portfolio Investment in any particular Indian company. Automatic Route is one in which the prior approval from the Central Government is not required. Government Route requires prior Government approval. Foreign investment in the sectors\/ activities given in Schedule I of the NDI Rules is permitted up to the limit indicated against each sector\/ activity, subject to various conditions. Direct Investment by Residents in Joint Venture (JV) \/ Wholly Owned Subsidiary (WOS) Abroad: These can be made through - Automatic Route or Approval Route. An Indian Party can make investment\/ undertake financial commitment in overseas Joint Ventures (JV) \/ Wholly Owned Subsidiaries (WOS), as per the ceiling prescribed by the RBI (currently 400% of the net worth as per the last audited balance sheet). External Commercial Borrowing (ECB): ECB can be raised as - (i) FCY denominated ECB and (ii) INR denominated ECB. Minimum average maturity period is 3 years, with some exceptions. ECB is permitted for specified purposes including General corporate purpose and working capital purpose. Trade Credits: Trade Credits (TC) refer to the credits extended by the overseas supplier, bank, financial institution and other permitted recognised lenders for prescribed maturity, for imports of capital\/non-capital goods. Per import transaction the ceiling amount is USD 150 million or equivalent (for oil\/gas refining & marketing, airline and shipping companies) and USD 50 million (for others). For capital goods the term is up to 3 years; and for non- capital goods - up to one year or the operating cycle whichever is less."]