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Facilities for Exporters and Importers
Imports
Imports – Prerequisites
AD1 banks are to ensure that Imports are in accordance with:
Exim Policy
RBI Guidelines
FERA Rules
Goods are as per OGL (Open General list).
Importer is having IEC (Import Export Code) issued by DGFT.
Imports Formalities & Time limit for import payment
The following are essential elements of Imports:
An importer before remitting proceeds exceeding USD 500 must submit application on Form A-1 to the Authorized Dealer.
AD banks can issue LC on the basis of License and Exchange Control Copy.
Remittance against exports should be completed within 6 months from date of shipment.
Any delay beyond 6 months will be treated as Deferred Payment arrangement and the same will be treated as Trade Credit up to the period less than 3 years.
Advance Remittances
AD Banks may remit advance payment of Imports subject to following conditions:
Up to USD 2,00,000 or equivalent after satisfying about nature of transaction, trade and standing of Supplier.
In excess of 2,00,000 USD, an irrevocable Standby LC or Guarantee from a bank of international repute or a guarantee from bank in India, if such guarantee is issued against Counter guarantee of International bank outside India.
The requirement of guarantee may not be insisted upon in case of remittances above USD200000 up to USD 50,00,000 (5 million) subject to suitable policy framed by BOD of bank.
The AD should be satisfied with track record of the exporter.
Approval of RBI is required only if Advance remittance exceeds USD 50,00,000 or equivalent.
Advance remittance will be made direct to Overseas supplier or his bank.
Physical imports must be made within 6 months from date of Remittance. For Capital goods, the period is 3 years.
Evidence of Imports
Importer must submit Evidence of Imports i.e. Exchange control copy of “Bill Of Entry”. The AD will ensure receipt of Bill Of Entry in all cases where Value of Forex exceeds USD 100000, within 3 months from date of remittance. Otherwise, one months’ notice will be served. If there is still default of 21 days after serving notice, Ad will forward Statement to RBI on Half yearly basis on BEF Form.
Import Finance Importer can avail finance from banks/FIs in the shape of :
Letter of Credit
Import Loans against Pledge/Hypothecation of stocks.
Trade Credit – Supplier Credit or Buyer Credit
Trade Credit If the Import proceeds are not remitted, within 6 months, it is treated as Trade Credit up to the period less than 3 years. For period 3 years and above, the credit is called ECB (External Commercial Borrowings).
Suppliers’ Credit
It is credit extended by Overseas suppliers to Importer normally beyond 6 months up to period of 3 years.
Up to 1 year for Current Account Transactions
Up to 3 years for Capital Account Transactions
Monetary Limit is USD 20 million per transaction.
Buyers’ Credit
It is credit arranged by Importer from Banks/Fis outside countries. Banks can approve proposals of Buyers’ Credit with period of Maturity:
Up to 1 year for Current Account Transactions
Up to 3 years for Capital Account Transactions
Monetary Limit is USD 20 million per transaction.
Crystallization of Foreign Currency Liability into INR
In case the importer fails to make payment,
crystallization of Foreign Exchange liability into Indian Rupees is done on 10th day at TT selling
Rate.
In case of Retirement of Import Bill
The crystallization is done at current Bill Selling Rate or Contracted Bill Selling Rate (Whichever
is higher).
DP Bill: On 10th Day from date of receipt of Import Bill.
DA Bill: On Actual Due Date.
All-in Cost Ceiling
The present Ceilings for all-in-cost, including interest for buyers’/suppliers’ credit, as fixed by
RBI is as under:
Up to 365 days –--------------------- LIBOR + 350 bps
Above 1 year up to 3 years --------LIBOR + 350 bps
These ceilings include management fees, arrangement fees etc.
Example On 12th Feb, a customer has received an Import bill for USD 10000/-. He asks you to retire the bill to the debit of the account. Considering Exchange margin 0.15% for TT sales and 0.20% on Bill Selling Rate. What amount will be debited to the account. Spot rate is 34.6500/34.7200
Spot march = 5000/4500
Rate applied will be Bill Selling Rate
Spot Rate = 34.7200
Add Margin for TT selling (0.15%) = 0.0520
TT selling Rate = 34.7720
Add margin for Bill selling@ 0.20% = 0.0695
Bill Selling Rate = 34.8415
Customers’ account will be debited with Rs. 348400/- (10000X 34.84)
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