Govt, RBI to consider giving e-commerce players up to 15 months to process FX payments

In a likely move to boost e-commerce exports, the central government and the Reserve Bank of India (RBI) are considering giving exporters more time (12 to 15 months) to make foreign currency (FX) payments, a senior government official told Moneycontrol.

This will essentially shorten the time it takes to repatriate the full value of exporters’ shipments by converting it into their domestic currency, the official said.

“The Directorate General of Foreign Trade (DGFT) of the Commerce Ministry has discussed this with the RBI. E-commerce entities have asked for a longer timeline of up to three years, but the Centre has asked for the upper limit to be increased to a maximum of 15 months,” an official told Moneycontrol.

The RBI is yet to take a final decision on this matter.

Currently, entities have 270 days, or nine months, to make export payments for most goods and services.

The proposal to ease the foreign exchange execution policy for e-commerce entities is part of the government’s broader effort to boost exports through this channel, given the growing number of purchases made online. RBI Framework

Execution of FX payments is a crucial step for exporters as it directly impacts their cash flow and profitability. RBI has a framework to monitor and facilitate this process.

The official said e-commerce players need a different ecosystem because the goods they sell often stay in warehouses for a long time before they are picked up.

“If it is purchased after 12 months, then the payment cannot be made within nine months as per the current schedule fixed by the RBI. Hence, such players require more flexibility,” the official added.

Relaxation of FEMA RBI guidelines in this regard would benefit e-commerce players who, apart from selling directly to consumers, also export goods, store them in warehouses abroad and sell them after a year or more. CAD obstacle

The RBI has been strictly following its foreign exchange policy, the official said, given that India has traditionally been running a current account deficit. He added that the government believes the situation needs to evolve as the country moves towards a more comfortable foreign exchange reserve position.

India’s current account deficit narrowed to 0.7% of GDP in fiscal 2024, from 2% in previous years, due to higher trade in services and higher net portfolio inflows.Export growth

The commerce ministry, along with the Department of Revenue, is also working on setting up dedicated e-commerce hubs across the country to streamline the online export process and ensure faster customs clearance of goods. As part of this initiative, the government is in talks with various e-commerce companies like Flipkart, Shiprocket and DHL Express to help micro, small and medium enterprises (MSMEs) export from India, helping it achieve its goal of $1 trillion in merchandise exports by 2030.