New currency norms give banks the ability to facilitate exports via e-commerce – Banking and finance news

The draft of new export and import rules released by the Reserve Bank of India is “extremely beneficial for exporters” as it aims to address day-to-day issues they face while sourcing and shipping goods by providing banks with more flexibility to deal with payment issues, traders said.

The draft Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2024 and the circular to banks authorised to deal in foreign exchange also simplify administrative matters by replacing 61 notifications for exports and 62 notifications for imports, Federation of Indian Export Organisations (FIEO) Director General and CEO Ajay Sahai said.

The proposed regulation also consolidates import and export regulations into one unified code, said Nangia Andersen partner Sandeep Jhunjhunwala. Currently, there are separate export and import regulations. “As per the proposed regulation, not only software but also other export services such as ‘consulting’ will be part of the export and import regulations,” Jhunjhunwala said.

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RBI proposes relaxation of currency rules for exporters

A circular issued by the RBI to banks authorised to trade in foreign exchange, which will give them the power to discount the value of exports by more than 25% on the request of exporters. Many of the powers that the RBI had in the area of ​​foreign trade have been transferred to banks, Sahai said.

Exporters must declare the value of the goods they are shipping to authorized dealer banks and ensure that they have received full payment for the shipments and have it updated in their records.

Currently, banks allow exporters to reduce the value of exports by a maximum of 25% in the event of a decline in revenues from exported goods.

This will help exporters of goods and e-commerce a lot, Sahai said. In e-commerce exports, selling prices fluctuate very quickly both ways, and the same is true for goods. With this flexibility, exporters will be able to avoid the “warning list”. Exporters can be placed on the warning list if they fail to return the full payment for the shipment within 24 months. After the “warning list”, exporters can sell abroad only after receiving full payment in advance or an irrevocable letter of credit.

The RBI circular also brings relief to exporters engaged in merchant trade.

Merchant trade, also known as indirect trade, is a trading model in which an Indian company buys goods from a foreign supplier and then sells them to a foreign buyer without the goods entering or leaving India. This is used by exporters engaged in agriculture and other commodity trade to maintain markets they have developed when the Indian government’s export restrictions block supplies or make them more expensive. Currently, merchant exporters have 125 days to make payment for goods purchased abroad and receive payment for products sold in third countries. It is proposed to extend this period to 180 days.

The RBI also directed banks to duly inform the exporter before marking him as ‘cautionable’ and give him an opportunity to submit his views.

Before 2020, a warning list was prepared by the RBI if export payments were delayed by more than 24 months and was done automatically by the computer system if the payment was not reflected in the shipped goods. Later, this task was given to authorised dealers as sometimes banks would not update the payment receipt on time and the system at the RBI would automatically ‘put it on the warning list’.