INTERNATIONAL

BANKING

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Updated upto
29.10.2022

Compiled By:
Gunjan Thakur
Chief Faculty
9619049922

Staff Training Centre, Noida

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DISCLAIMER
Though every effort has been made to incorporate latest guidelines for updating of the
contents for ready reference of users, this chapter is not a substitute of Bank‘s Circulars/
guidelines and regulatory directives/ advisories. Any suggestion for rectification of any
inadvertent error or for improvement of the contents is welcome and may be emailed to
stc_noida@[Link]
 TABLE OF CONTENTS
S. No. PARTICULARS
1. International Banking: Organizational Structure

2. Definitions: NRI/ PIO/ NRE/ NRO/ FCNR

3. Facilities for Residents/ Outward Remittances – Other than Imports

4. Letter of Credit

5. Documents in International Trade

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6. Checking of Documents

7. Exchange Rate Mechanism

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International Commercial Terms (INCOTERMS)

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9. Uniform Customs and Practices for Documentary Credit – (UCPDC 600)

10. Export Credit

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11. Usance Bill Payable at Sight (UPAS)

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12 Acceptance of Forwarder Cargo Receipt

13. Interest Rates

14. Export Gold Card / Normal Transit Period (NTP)

15. Import of Goods and Services

16. Outward / Inward Remittances Policy (ORM/ IRM)

17. SWIFT

17. World Travel Card (WTC)

18. Notional Rates / Full Fledged Money Changers (FFMC)

19. Rupee Drawing Arrangements (RDA)

20. Foreign Contribution Regulation Act (FCRA)

21. Forward Contracts

22. Foreign Exchange Dealers Association of India (FEDAI)

23. Import Data Processing and Monitoring System (IDPMS)

24. Export Data Processing and Monitoring System (EDPMS)

25. Miscellaneous Topics

26. Changes during last week

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 International Banking: Organizational Structure
It is responsible for administrative functions, policy formulation, planning, and overseas expansion.

Basically there are 2 desks in International Banking Division which are as under.
1- Overseas Desk
2- Domestic Desk

Functions of Overseas Desk are as under :

1- Matters related to our overseas branches.

2- Matters related to subsidiaries.
3- Matters related to Joint Ventures
4- Matter related to Representative offices

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5- Matter related to Credit , GAD , HRD of branches situated outside India
6- Matters related to officials posted outside India
7- Matters related to Research and Planning for overseas Expansion.
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Functions of Domestic Desk are as under :
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1- Development and Control of Foreign Exchange

2- Business Correspondent Banking

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3- Complaints relating to Foreign Exchange Business

4- Guidance providing to field regarding EDPMS/IDPMS
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5- Liaison with FIEO:

The Federation of Indian Export Organizations represents the Indian entrepreneur’s spirit of enterprise
in the global market. Known popularly as "FIEO", this apex body of Indian export promotion
organizations was set up jointly by the Ministry of Commerce, Government of India and private trade
and industry in the year 1965. FIEO is thus a partner of the Government of India in promoting India's
exports and other authorities regarding International Trade.

It issues circulars on instructions of RBI and other Govt. agencies to the branches for smooth handling
of FEX business
 Circulars issued by the International Banking Division:

Sr Circular Category Meaning

No
1 IBD : Foreign Exchange Circulars related to various guidelines and schemes
for international business.
2 IBD : Agency Arrangement Circulars related to our bank’s arrangement with
different banks globally and list of approved banks
and specific approval of banks.
3 IBD : Exchange Control Circulars related to RBI guidelines for changes in
FEMA or related subject.
4 IBD : Foreign Exchange Circular Information received from FEDAI or other agencies
Letter

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As per IBD : Foreign Exchange Circular No 57/2022 our bank is having 230 AD branches an 6
Exchange Bureaus (EB). In the said circular following details are provided for 230 AD Branches.
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1- Postal Address
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2- E-Mail
3- Telephone Number
4- SWIFT Code
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Branches not authorized to handle foreign exchange business should not handle any forex transactions on
their own and the same should be routed through nearest authorized branch to TFCs.
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Overseas Presence

Our Bank is having overseas presence in 8 countries. We are having overseas branches at Hong Kong and
at DIFC Dubai. Our Hong Kong branch is under closure and no fresh business is being executed by Hong
Kong branch. Besides we are having Subsidiaries / Joint Venture namely Punjab National Bank
(International) Ltd, UK (7 branches), Druk PNB Bank Ltd, Bhutan (8 branches), Everest Bank Ltd, Nepal (105
branches) and two Representative Offices at Dhaka (Bangladesh) and at Yangon (Myanmar).

Our overseas branches are providing trade finance facilities to customers of our domestic branches. These
branches also facilitate remittances for Non Resident Indians (NRIs) etc.

Our branches may utilize the services of these overseas branches/ subsidiaries/ joint venture for advising
import letters of credit (LCs), forwarding export bills drawn by domestic exporters for realization depending
upon the reimbursement instructions mentioned in Letters of credit (LCs). Branches may also address
queries, if any, to the overseas branches through email or may contact their respective Back Offices situated
at New Delhi.

Bank is having Joint Venture with Everest Bank Ltd. (EBL), Kathmandu, Nepal where we provide
Management/Technical support. Our Bank is having a Rupee Drawing Arrangement (RDA) for facilitating
inward remittances from Nepal and INREMIT scheme for remittances from India to Nepal. EBL is having a
representative office at New Delhi, and the branches may contact them for any help/ query.
The domestic branches can also get assistance from subsidiaries functioning at UK, Bhutan for any
requirements of its customers having business interest in these countries.
Our Representative Offices (ROs) facilitate business for domestic branches like liaising and meeting with
NRIs, business houses, developing /maintaining relationship with the correspondent banks etc. and are point
of contact for source of information/follow up with Banks abroad for various issues including for overdue bills
etc.

The domestic branches can also contact the Back Offices of BO: DIFC Dubai, BO: Hong Kong and PNBIL at
New Delhi for any transactions related assistance/information with these overseas branches/subsidiaries. No
fresh lending is being done by Hong Kong branch, as such, all AD branches and nodal branch for Buyers
Credit (i.e. TFC Delhi) are advised to approach BO DIFC Dubai for any Trade Credit related facilities.

Summary of Overseas Presence

Sr No Particulars Details

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1 Overseas Branches Hong Kong
Dubai
2 100 Percent Subsidiary Punjab National Bank International Limited (PNBIL)
7 Branches work under PNBIL
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3 Subsidiary Druk PNB Bank Ltd , Bhutan
8 Branches work under this subsidiary .
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4 Joint Venture Everest Bank Ltd , Nepal
100 Branches work under this Joint Venture.
5 Representative Office Dhaka (Bangladesh)
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Yangoon (Myanmaar)
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 1. Definitions: NRI/ PIO/ NRE/ NRO/ FCNR
Non-resident Indian nationals generally fall under the following broad categories:

a. Indian citizens who stay abroad for employment or for carrying on any business or vocation or for
any other purpose, in circumstances indicating an indefinite period of stay outside India.

b. Indian citizens working abroad on assignment with foreign Government, Government Agencies or
International/multinational agencies like United Nations , International Monetary Fund (IMF), World
Bank (IBRD), etc.

c. Officials of Central and State Governments and Public Sector Undertakings deputed abroad on
assignments with foreign governments/agencies/organizations or posted to their own offices
(Including Indian Diplomatic Missions) abroad.

Note:

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Non-resident Indians become residents of India only when they come to India for employment or for carrying
on in India any business or vocation or for any other purpose indicating an indefinite period of stay in India.
They are not regarded as persons resident in India during their short visits to India for holiday, business, etc
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Non-Resident Indian National ( as per Income Tax Act):
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Under Section 6 of Income Tax Act an individual is said to be non-resident in India if he is not a resident in
India and an individual is deemed to be resident in India in any previous years if he satisfies any of the
following conditions:
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a. If he is in India for a period of 182 days or more during the previous year ; or
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b. If he is in India for a period of 60 days or more during the previous year and 365 days or more during
4 Years immediately preceding the previous year. However (b) above does not apply where an
individual being citizen of India or a person of Indian origin, who being outside India, comes to visit
India during the previous Year.

Persons of Indian Origin (PIO):

A foreign citizen (not being a citizen of Pakistan or Bangladesh) is deemed to be a person of Indian origin
(PIO) if:

a. He, at any time, held an Indian passport, or

b. he or either of his parents or any of his grandparents was a citizen of India, by virtue of Constitution
of India or Citizenship Act, 1955 ( 57 of 1955) , or
c. the person is spouse of an Indian citizen or a person referred to in sub clause 1) or 2) above.
 Facilities for Students

1) Students going abroad for studies are treated as Non-Resident Indians (NRIs) and are eligible for all
the facilities available to NRIs under FEMA.
2) All other facilities available to NRIs under FEMA are equally applicable to the students.
3) Educational and other loans availed of by them as residents in India will continue to be
available as per FEMA regulations.
Mainly Accounts are maintained in the shape of NRE, NRO & FCNR Accounts.

Various features of these accounts are given here under.

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Particulars Non-Resident Foreign Currency Non-Resident Ordinary Rupee
(External) Rupee (Non-Resident) Account Scheme [NRO Account]
Account Scheme Account (Banks)
[NRE Account] Scheme [FCNR (B)
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Account]
Who can open NRIs and PIOs Any person resident outside India for
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an account putting through bonafide transactions in
Individual/entities of Pakistan and Bangladesh rupees.
shall requires prior approval of the Reserve
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Bank of India Individuals/ entities of Pakistan

nationality/ origin and entities of
Bangladesh origin require the prior
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approval of the Reserve Bank of India.

A Citizen of Bangladesh/Pakistan
belonging to minority communities in
those countries i.e. Hindus, Sikhs,
Buddhists, Jains, Parsis and Christians
residing in India and who has been
granted LTV or whose application for LTV
is under consideration, can open only
one NRO account with an AD bank
subject to the conditions mentioned
in Notification No. FEMA 5(R)/2016-RB
dated April 01, 2016, as updated from
time to time.
Joint account May be held jointly in the names of two or more May be held jointly in the names of two or
NRIs/ PIOs. more NRIs/ PIOs.

NRIs/ PIOs can hold jointly with a resident May be held jointly with residents on
relative on ‘former or survivor’ basis (relative as ‘former or survivor’ basis.
defined in Companies Act, 2013). The resident
relative can operate the account as a Power of
Attorney holder during the life time of the NRI/
PIO account holder.
Currency INR USD , GBP, EURO , INR
AUD, CAD , JPY
Type of Savings, Current, Term Deposit only Savings, Current, Recurring, Fixed
Account Recurring, Fixed Deposit
Deposit
Period for The minimum maturity For terms not less As applicable to resident accounts.
fixed deposits period for NRE term than 1 year and not Minimum Tenor of NRO FDR is 7 Days
deposit is 1 year and more than 5 years.
maximum 3 years.
However, banks are
allowed to accept NRE
deposits above 3 years
and upto 10 years from
their Asset liability point
of view, provided the
rate of interest on such
long term deposits is not

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higher than that
applicable to domestic
deposit of same
maturity. 22 1
Permissible
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Credits permitted to this account are inward Inward remittances from outside India,
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Credits remittance from outside India, interest accruing legitimate dues in India and transfers
on the account, interest on investment, transfer from other NRO accounts are permissible
from other NRE/ FCNR(B) accounts, maturity credits to NRO account.
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proceeds of investments (if such investments

were made from this account or through inward Rupee gift/ loan made by a resident to a
remittance). NRI/ PIO relative within the limits
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prescribed under the Liberalised

Current income like rent, dividend, pension, Remittance Scheme may be credited to
interest etc. will be construed as a permissible the latter’s NRO account.
credit to the NRE account.

Care: Only those credits which have not lost

repatriable character
Permissible Permissible debits are local disbursements, The account can be debited for the
Debits remittance outside India, transfer to other NRE/ purpose of local payments, transfers to
FCNR(B) accounts and investments in India. 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 in
Foreign Exchange Management
(Remittance of Assets) Regulations,
2016.

Funds can be transferred to NRE account

within this USD 1 Million facility.
Repatriablity Repatriable Not repatriable except for all current
 income.

Balances in an NRO account of NRIs/

PIOs are remittable up to USD 1 (one)
million per financial year (April-March)
along with their other eligible assets.
Taxabilty Income earned in the accounts is exempt from Taxable
income tax and balances exempt from wealth
tax
Loans in India AD can sanction loans in India to the account Loans against the deposits can be
holder/ third parties without any limit, subject to granted in India to the account holder or
usual margin requirements. These loans cannot third party subject to usual norms and
be repatriated outside India and can be used in margin requirement. The loan amount
India only for the purposes specified in the cannot be used for relending, carrying on
regulations. agricultural/ plantation activities or
investment in real estate.

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In case of loans sanctioned to a third party,
there should be no direct or indirect foreign The term “loan” shall include all types of
exchange consideration for the non-resident fund based/ non-fund based facilities.
depositor agreeing to pledge his deposits to
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enable the resident individual/ firm/ company to
obtain such facilities.
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In case of the loan sanctioned to the account
holder, it can be repaid either by adjusting the
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deposits or through inward remittances from

outside India through banking channels or out of
balances held in the NRO account of the
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account holder.

The facility for premature withdrawal of deposits

will not be available where loans against such
deposits are availed of.

The term “loan” shall include all types of fund

based/ non-fund based facilities.
Loans outside Authorized Dealers may allow their branches/ Not permitted
India 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/ FCNR (B) accounts in India, subject to
usual margin requirements.

The term “loan” shall include all types of fund

based/ non-fund based facilities
Operations by Operations in the account in terms of Power of Operations in the account in terms of
Power of Attorney are restricted to withdrawals for Power of Attorney is restricted to
Attorney in permissible local payments or remittance to the withdrawals for permissible local
favour of a account holder himself through normal banking payments in rupees, remittance of current
resident channels. income to the account holder outside
 India or remittance to the account holder
himself through normal banking
channels. While making remittances, the
limits and conditions of repatriability will
apply.
Change in NRE accounts should On change in
NRO accounts may be designated as
residential be designated as
residential status,
resident accounts on the return of the
status from resident accounts or the FCNR (B) deposits account holder to India for any purpose
Non-resident funds held in these may be allowed to indicating his intention to stay in India for
to resident accounts may be
continue till maturity atan uncertain period.
transferred to the RFC the contracted rate of
accounts, at the option interest, if so desired Likewise, when a resident Indian
of the account holder, by the account holder. becomes a person resident outside India,
immediately upon the his existing resident account should be
return of the account Authorised dealers designated as NRO account.
holder to India for taking
should convert the
up employment or on

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FCNR(B) deposits on
change in the residentialmaturity into resident
status. rupee deposit
accounts or RFC
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account (if the

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depositor is eligible to
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open RFC account), at
the option of the
account holder.
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Accout FEX 112 & PNB- FEX 112 & PNB- FEX 112 & PNB-1228A/2017
Opening Form 1228A/2017 1228A/2017
Branches to All Branches Designated Branches All Branches
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Handle
Accounts
Accounts in
NRE Accounts in the FCNR (B) Accounts in NRO Accounts in the name of Overseas
the name of name of Overseas the name of Overseas Corporate Bodies (OCBs) cannot be
Overseas Corporate Bodies Corporate Bodies opened.
Corporate (OCBs) cannot be (OCBs) cannot be
Bodies. opened. No branch will opened. No branch
open and maintain Non- will open and maintain
Resident (External) FCNR (B), Deposit
Rupee Account of OCBs.
Account (NRE), Deposit
Account of OCBs.
ISSUANCE OF Can Be Issued Not Required Can Be Issued
CHEQUE
BOOKS
ADDITIONAL NO ADDITIONAL NO ADDITIONAL NO ADDITIONAL INTEREST shall be
INTEREST ON INTEREST shall be paid INTEREST shall be paid on NRE deposits in the name of
NRE on NRE deposits in the paid on FCNR (B) members of staff (Existing or retired)
DEPOSITS TO name of members deposits in the name
MEMBERS OF of staff (Existing or of
STAFF retired) members of staff
(EXISTING (Existing or retired)
OR RETIRED)
INTEREST No interest is to be paid The Interest on No interest is to be paid on Current Non-
on Current Non- deposits accepted Resident Ordinary Accounts. Rate of
Resident External under FCNR (B) interest on Saving Fund deposits and
Accounts. Rate of scheme shall be paid Term Deposit Schemes is same as
interest payable on on the basis of 360 applicable to domestic deposits in our
Saving Fund deposits days a year. For Bank.
and Term Deposit deposits up to one
Schemes shall be year interest is
circulated by IRMD HO payable at the
from time to time. applicable rate without
However, the interest any compounding
rates offered on NRE effect. In respect of
SF and term deposit deposits for more than
schemes, cannot be one year, interest is
higher than the rates payable at intervals of
offered on comparable 180 days each and
domestic rupee thereafter for the

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deposits. remaining actual
number of days.
Reference:
Particulars Circular(s) 22 1
NRE
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IBD : Foreign Exchange : 67/2020
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NRO IBD : Foreign Exchange : 67/2020
FCNR IBD : Foreign Exchange : 67/2020
Consolidated IBD : Foreign Exchange : 67/2020
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Circular on deposit
Schemes
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Penalty on Premature Withdrawal of deposits: Under FCNR (B) deposit: In case deposits under FCNR (B)
scheme are withdrawn before maturity, the rate of interest payable on such deposits to be subject to a
penalty of 25% of the current applicable rate for the tenor for which the deposit has been in force with the
bank subject to maximum 1%.

Facilities for Residents/ Outward Remittances (other than Imports)

1- For release of foreign exchange to persons resident in India for various current account transactions,
AD branches are to be guided by the rules made by the Government of India under Section 5 of the
Foreign Exchange Management Act, 1999 which are detailed in the Foreign Exchange Management
(Current Account Transactions) Rules, 2000 (hereinafter referred to as the Rules) notified by the
Government of India. In terms of the said Rules, drawal of foreign exchange for certain categories of
transactions listed in Schedule I (Annexure-I) is expressly prohibited. Exchange facilities for
transactions included in Schedule II (Annexure-II) to the Rules may be permitted by the AD
branches provided the applicant has secured the approval from the Ministry/ Department of the
Government of India as specified therein. In respect of transactions included in Schedule III
(Annexure-III) to the Rules, prior approval of the Reserve Bank of India would be required for
remittance exceeding the specified limits. The release of foreign exchange up to the threshold
ceilings specified in Schedule III stands delegated to the AD branches. All applications for release of
 foreign exchange exceeding the limits as prescribed in Schedule III to the Rules should be referred
to the Regional Office concerned of the Foreign Exchange Department of the Reserve Bank of India,
under whose jurisdiction the applicant is functioning/ residing.
Transactions which are Prohibited (Annexure-I)
Sr No Detail of Transaction

1 Remittance out of lottery winnings.

2 Remittance of income from racing/riding etc. or any other hobby.

3 Payment of commission on exports made towards equity investment in Joint Ventures / Wholly
Owned Subsidiaries abroad of Indian companies.

4 Remittance for purchase of lottery tickets, banned /proscribed magazines, football pools,
sweepstakes, etc.

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5 Remittance of dividend by any company to which the requirement of dividend balancing is
applicable.

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6 Payment of commission on exports under Rupee State Credit Route, except commission up to 10%
of invoice value of exports of tea and tobacco .
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7 Payment related to "Call Back Services" of telephones.
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8 Remittance of interest income on funds held in Non-Resident Special Rupee (Account) Scheme.

Transactions which require prior approval of the Central Government

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(Annexure-II)
Purpose of Remittance Ministry / Department of Govt. of India
whose approval is required

Cultural Tours Ministry of Human Resources

Development, (Department of Education
and Culture)

Advertisement in foreign print media for the purposes other than Ministry of Finance,
promotion of tourism, foreign investments and international (Department of Economic Affairs)
bidding (exceeding USD 10,000) by a State Government and its
Public Sector Undertakings

Remittance of freight of vessel chartered by a PSU Ministry of Surface Transport,

(Chartering Wing)

Payment of import through ocean transport by a Govt. Ministry of Surface Transport,

Department or a PSU on c.i.f. basis (i.e. other than f.o.b. and (Chartering Wing)
f.a.s. basis)

Multi-modal transport operators making remittance to their Registration Certificate from the Director
agents abroad General of Shipping
Remittance of hiring charges of transponders by :- Ministry of Information and Broadcasting
TV Channels Ministry of Communication and
. Internet Service providers Information Technology

Remittance of container detention charges exceeding the rate Ministry of Surface Transport (Director
prescribed by Director General of Shipping General of Shipping)

Remittance of prize money/sponsorship of sports activity abroad Ministry of Human Resources

by a person other than International / National / State Level Development (Department of Youth
sports bodies, if the amount involved exceeds USD 100,000. Affairs and Sports)

Remittance for membership of P&I Club Ministry of Finance (Insurance Division)

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Facilities for Individuals (Annexure-III)
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Individuals can avail of foreign exchange facility for the following purposes within the limit of USD 250,000
only. Any additional remittance in excess of the said limit for the following purposes shall require prior
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approval of the Reserve Bank of India.

(i) Private visits to any country (except Nepal and Bhutan).

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(ii) Gift or donation.

(iii) Going abroad for employment.
(iv) Emigration.
(v) Maintenance of close relatives abroad.
(vi) Travel for business, or attending a conference or specialized training or for meeting expenses
for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a
patient going abroad for medical treatment/ check-up.
(vii) Expenses in connection with medical treatment abroad.
(viii) Studies abroad.
(ix) Any other current account transaction

Provided that for the purposes mentioned at item numbers (iv), (vii) and (viii), the individual may avail of
exchange facility for an amount in excess of the limit prescribed under the Liberalized Remittance Scheme if
it is so required by a country of emigration, medical institute offering treatment or the university, respectively.

Provided further that if an individual remits any amount under the said Liberalized Remittance Scheme in a
financial year, then the applicable limit for such individual would be reduced from USD 250,000 (US Dollars
Two Hundred and Fifty Thousand Only) by the amount so remitted.

Provided also that for a person who is resident but not permanently resident in India and –

a) is a citizen of a foreign State other than Pakistan; or

b) is a citizen of India, who is on deputation to the office or branch of a foreign company or subsidiary or joint
venture in India of such foreign company, may make remittance up to his net salary (after deduction of taxes,
contribution to provident fund and other deductions).

Explanation: For the purpose of this item, a person resident in India on account of his employment or
deputation of a specified duration (irrespective of length thereof) or for a specific job or assignments, the
duration of which does not exceed three years, is a resident but not permanently resident: provided also that
a person other than an individual may also avail of foreign exchange facility, mutatis mutandis, within the limit
prescribed under the said Liberalised Remittance Scheme for the purposes mentioned herein above.

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Facilities for persons other than an individual
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The following remittances by persons other than individuals shall require prior approval of the Reserve Bank
of India.
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(i) Donations exceeding one per cent. of their foreign exchange earnings during the previous three financial
years or USD 5,000,000, whichever is less, for-

(a) Creation of Chairs in reputed educational institutes,

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(b) Contribution to funds (not being an investment fund) promoted by educational institutes; and
(c) Contribution to a technical institution or body or association in the field of activity of the donor
company.
(i) Commission, per transaction, to agents abroad for sale of residential flats or commercial plots in India
exceeding USD 25,000 or five percent of the inward remittance whichever is more.

(ii) Remittances exceeding USD 10,000,000 per project for any consultancy services in respect of
infrastructure projects and USD 1,000,000 per project, for other consultancy services procured from outside
India.

2- Drawal of foreign exchange also includes use of International Credit Cards (ICC), International Debit
Cards (IDC), ATM cards, etc. ―Currency‖, inter-alia, includes ICC, IDC and ATM Cards.
Accordingly, all rules, regulations made and direction issued under the Act apply to the use of ICC,
IDC and ATM Cards.

3- Release of foreign exchange is not admissible for travel to and transaction with residents of
Nepal and Bhutan.

4- All AD branches to ensure that all outward remittances to be handled through Trade Finance
Centre (TFC), New Delhi.

Sale of Exchange in the form of Foreign Currency Notes

Out of the overall foreign exchange (USD 250,000 per financial year under LRS) being sold to a traveller,
exchange in the form of foreign currency notes and coins may be sold up by AD Branch/Exchange Bureau to
the limit indicated below:

Particular Detail
Travelers proceeding to countries other than Iraq, Not exceeding USD 3000 per visit or its equivalent.
Libya, Islamic Republic of Iran, Russian Federation
and other Republics of Commonwealth of
Independent States

Travelers proceeding to Iraq or Libya Not exceeding USD 5000 per visit or its equivalent.

Travelers proceeding to Islamic Republic of Iran, Full exchange may be released.

Russian Federation and other Republics of
Commonwealth of Independent States -

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Travelers proceeding for Haj/Umrah pilgrimage Full amount of entitlement in cash or up to the cash
limit as specified by the Haj Committee of India, may
be released.
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Period of surrender of unutilized/ unspent foreign exchange

1- In case the foreign exchange purchased for a specific purpose is not utilized for that purpose, it
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could be utilized for any other eligible purpose for which drawl of foreign exchange is permitted
under the relevant Rules / Regulation.

2- General permission is available to any resident individual to surrender received/ realized/ unspent/
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unused foreign exchange to an AD Branch/ Exchange Bureau within a period of 180 days from the
date of receipt / realization / purchase / acquisition / date of return of the traveler, as the case may
be.

3- Where a person approaches an AD Branch/Exchange Bureau for surrender of unspent/ unutilized

foreign exchange after the prescribed period of 180 days, AD Branch/Exchange Bureau should not
refuse to purchase the foreign exchange merely on the ground that the prescribed period has
expired.

4- The liberalized uniform time limit of 180 days is applicable only to resident individuals and in areas
other than export of goods and services. In all other cases, the regulations/ directions on surrender
requirement shall remain unchanged.

Exemption for surrender of unspent foreign exchange

A returning traveler or resident is permitted to retain with him, foreign currency, travelers’ cheques and
currency notes up to an aggregate amount of USD 2000 and foreign coins without any ceiling beyond 180
days. Foreign exchange so retained, can be utilized by the resident / traveler for his subsequent visit abroad.

Remittances for tour arrangements etc.

AD branches may remit foreign exchange up to a reasonable limit, at the request of a traveler towards his
hotel accommodation, tour arrangements, etc., in the countries proposed to be visited by him. Further, all
tour related expenses including cost of rail/road/water transportation charges outside India and remittances
relating towards cost of Euro Rail; passes/tickets, etc. for Indian travelers, and overseas hotel/flight charges
have been subsumed under the new enhanced LRS limit of USD 250,000.

International Credit Cards (ICC)

1- The restrictions contained in Rule 5 of the Foreign Exchange Management (Current Account
Transactions) Rules, 2000 will not be applicable for use of International Credit Cards (ICCs) by
residents for making payment towards expenses, while on a visit outside India.

2- Residents can use ICCs on internet for any purpose for which exchange can be purchased from an
AD branch in India, e.g. for import of books, purchase of downloadable software or import of any
other item permissible under Foreign Trade Policy (FTP).

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3- ICCs cannot be used on internet or otherwise for purchase of prohibited items, like lottery tickets,
banned or proscribed magazines, participation in sweepstakes, payment for call-back services, etc.
as such transactions are not permitted.
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4- There is no aggregate monetary ceiling separately prescribed for use of ICCs through internet.
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5- Resident individuals maintaining foreign currency accounts with an AD branch in India or a bank
abroad, as permissible under extant Foreign Exchange Regulations, are free to obtain ICCs issued
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by overseas banks and other reputed agencies. The charges incurred against the card either in India
or abroad, can be met out of funds held in such foreign currency account/s of the card holder or
through remittances, if any, from India only through a bank where the card holder has a current or
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savings account. The remittance for this purpose should also be made directly to the card
issuing agency/bank abroad, and not to a third party. The applicable limit will be the credit limit
fixed by the card issuing banks. There is no monetary ceiling fixed by the Reserve Bank of India for
remittances, if any, under this facility.

6- Use of ICC for payment in foreign exchange in Nepal and Bhutan is not permitted.

7- AD branch may issue ICCs to NRIs/ PIOs, without prior approval of the Reserve Bank of India,
subject to the condition that charges on the use of ICCs should be settled by the concerned NRIs/
PIOs only out of inward remittances or balances held in their Non-Resident External (NRE)
Accounts/ Foreign Currency Non-Resident (FCNR) Accounts.

International Debit Cards (IDC)

1- Banks authorized to deal in foreign exchange may issue International Debit Cards (IDCs) which can
be used by a resident for drawing cash or making payment to a merchant establishment overseas
during his visit abroad. IDCs can be used only for permissible current account transactions and the
limits as mentioned in the Schedules to the Rules, as amended from time to time, are equally
applicable to payments made through use of these cards.
 2- The IDCs cannot be used on internet for purchase of prohibited items like lottery tickets, banned or
proscribed magazines, participation in sweepstakes, payment for call-back services, etc., i.e. as
such transactions are not permitted.

Remittance facilities for others

Gift/ Donation

General permission is available to persons other than individuals to remit towards donations upto 1% of their
foreign exchange earnings during the previous 3 financial years or USD 5,000,000, whichever is less, for :-

(a) creation of Chairs in reputed educational institutes,

(b) contribution to funds (not being an investment fund) promoted by educational institutes; and
(c) Contribution to a technical institution or body or association in the field of activity of the donor
Company.

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Any additional remittance in excess of the same shall require prior approval of the Reserve Bank of India.
Applications for remittances for purposes other than those specified above may be forwarded to the Chief
General Manager, Reserve Bank of India, Central Office, Foreign Exchange Department, Foreign
Investments Division (EPD), Central Office Building, Mumbai-400 001, together with :-
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(a) details of their foreign exchange earnings during the last 3 years,
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(b) brief background of the company‘s activities,
(c) purpose of the donation and
(d) likely benefits to the corporate.
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Commission to Property Agents abroad for sale of residential flats or commercial plots in India
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Remittances by persons other than individuals shall require prior approval of the Reserve Bank of India if
commission per transaction to agents abroad for sale of residential flats or commercial plots in India exceeds
USD 25,000 or 5% of the inward remittance whichever is more.

Remittances towards consultancy services

Remittances by persons other than individuals shall require prior approval of the Reserve Bank of India if
remittances exceed USD 10,000,000 per project for any consultancy services in respect of infrastructure
projects and USD 1,000,000 per project, for other consultancy services procured from outside India.

Remittances towards re-imbursement of pre-incorporation expenses

Remittances by persons other than individuals shall require prior approval of the Reserve Bank of India for
remittances exceeding five per cent of investment brought into India or USD 100,000 whichever is higher, by
an entity in India by way of reimbursement of pre-incorporation expenses.
Income- tax clearance

RBI does not issue any instructions under the FEMA regarding the procedure to be followed in respect of
deduction of tax at source while allowing foreign remittances. It shall be mandatory on the part of AD branch
to comply with the requirement of the tax laws prevailing for international outward remittances, as per
guidelines issued by IBD/ Government Business Division/ Government of India. It is also mandatory to
have PAN card to make remittances under the LRS for all transactions.

Liberalized Remittance Scheme (LRS) of USD 250,000 for Resident Individuals

1- Under the Liberalised Remittance Scheme (LRS), AD branch may freely allow remittances by
Resident Individuals up to USD 250,000 per Financial Year (April- March) for any permitted current
or capital account transaction or a combination of both.

2- The Scheme is not available to corporate, partnership firms, HUF, Trusts, etc.

3- The Scheme is available to all resident individuals including minors. In case of remitter being a
minor, the letter of Application/ Form A2 must be countersigned by the minor‘s natural guardian.

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4- Remittances under the Scheme can be consolidated in respect of family members subject to
individual family members complying with its terms and conditions. However, clubbing is not
permitted by other family members for capital account transactions such as opening a bank
account/investment, if they are not the co-owners/co-partners of the overseas bank account/
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investment. Remittances for purchase of property shall be in accordance with the provisions under
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paragraph 6(ii). Further, a resident cannot gift to another resident, in foreign currency, for the credit
of the latter’s foreign currency account held abroad under LRS.
5- All other transactions which are otherwise not permissible under FEMA and those in the nature of
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remittance for margins or margin calls to overseas exchanges/ overseas counterparty are not
allowed under the Scheme.
6- The permissible capital account transactions by an individual under LRS are:
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(i) opening of foreign currency account abroad with a bank; (ii) acquisition of immovable property
abroad, Overseas Direct Investment (ODI) and Overseas Portfolio Investment (OPI), in accordance
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; (iii) extending loans including loans
in Indian Rupees to Non-resident Indians (NRIs) who are relatives as defined in Companies Act,
2013.

Current Account Transactions

The limit of USD 250,000 per Financial Year (FY) under the Scheme includes/subsumes remittances for
current account transactions (viz. private visit; gift/donation; going abroad on employment; emigration;
maintenance of close relatives abroad; business trip; medical treatment abroad; studies abroad etc.)
available to resident individuals under Para 1 of Schedule III to Foreign Exchange Management (Current
Account Transactions) Amendment Rules, 2015 dated May 26, 2015 issued by Reserve Bank of India.
Release of foreign exchange exceeding USD 250,000 requires prior permission from RBI.

Private visits
Any resident individual can obtain foreign exchange up to an aggregate amount of USD 2,50,000, from an
AD branch, in any one financial year, for private visits abroad, other than Nepal and Bhutan irrespective of
the number of visits undertaken during the year. Further, 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 can collect this amount either in Indian
rupees or in foreign currency from the resident traveller.

Gift/ Donation
Any resident individual may remit up-to USD 2,50,000 in one FY as gift to a person residing outside India
who is not resident of India or as donation to an organization established outside India not owned by resident
Indian.

Going abroad on employment

Resident Individual going abroad for employment can draw foreign exchange up to USD 2,50,000 per FY
from any AD branch in India.

Emigration

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A person wanting to emigrate can draw foreign exchange from AD branch up to the amount prescribed by
the country of emigration or USD 250,000. Remittance of any amount of foreign exchange outside India in
excess of this limit may be allowed only towards meeting incidental expenses in the country of immigration.
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However remittance for emigration is not allowed for earning points or credits to become eligible for

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immigration by way of overseas investments in government bonds, land, commercial enterprise etc.
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Maintenance of close relatives abroad
A resident individual can remit up-to USD 250,000 per FY towards maintenance of close relatives abroad.
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[―Relative‖ as defined in Section 2 (77) of the Companies Act, 2013]

Business trip
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Visits by Resident individuals in connection with attending of an international conference, seminar,

specialized training, apprentice training, etc., are treated as business visits. For business trips to foreign
countries, resident individuals can avail of foreign exchange up to USD 250,000 in a FY irrespective of the
number of visits undertaken during the year.

Medical treatment abroad

AD branch may release foreign exchange up to an amount of USD 250,000 or its equivalent per FY without
insisting on any estimate from a hospital/ doctor. For amount exceeding the above limit, AD branch may
release foreign exchange under general permission based on the estimate from the doctor/ hospital in India
or hospital/ doctor abroad. A person who has fallen sick after proceeding abroad may also be released
foreign exchange by an AD branch (without seeking prior approval of the Reserve Bank of India) for medical
treatment outside India.

In addition to the above, 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.

Facilities available to students for pursuing their studies abroad

AD branch may release foreign exchange up to USD 250,000 or its equivalent to resident individuals for
studies abroad without insisting on any estimate from the foreign University. However, AD branch may allow
remittances (without seeking prior approval of the Reserve Bank of India) exceeding USD 250,000 based on
the estimate received from the institution abroad after getting approval from concerned Zonal office of the
Bank.
Remittances under the LRS 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.

The LRS Scheme can be used for outward remittance in the form of a DD either in the resident individual‘s
own name or in the name of beneficiary with whom remitter intends putting through the permissible
transactions at the time of private visit abroad, against self-declaration of the remitter.

Individuals can also open, maintain and hold foreign currency accounts with a bank outside India for making
remittances under the LRS without prior approval of the Reserve Bank of India. The foreign currency
accounts may be used for putting through all transactions connected with or arising from remittances eligible
under LRS.

OUTWARD REMITTANCE FACILITY UNDER LIBERALIZED REMITTANCE SCHEME (LRS) -THROUGH

PNB INTERNET BANKING (Cir .77/2021)
Bank has introduced a new facility viz. Outward Remittance under LRS through Internet Banking for Retail

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customers, which facilitates customers to initiate and submit transaction request online for processing by the
Bank.

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Remittance of Assets
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Remittance outside India by a person whether resident in India or not, of assets in India, are governed by
section 47 of the Foreign Exchange Management Act, 1999 (FEMA) read with Notification No. FEMA 13(R)/
2016-RB dated April 1, 2016 and amendments by Reserve bank of India from time to time.
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'Remittance of Assets' means remittance outside India of funds in a deposit with a bank/ firm/ company,
provident fund balance or superannuation benefits, amount of claim or maturity proceeds of insurance policy,
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sale proceeds of shares, securities, immovable property or any other asset held in India in accordance with
the provisions of the Foreign Exchange Management Act, 1999 (FEMA) or rules/ regulations made under
FEMA.

‘Expatriate Staff' is a person whose provident/ superannuation/ pension fund is maintained outside India by
his principal employer outside India.

‘Not Permanently Resident' is a person resident in India for employment of a specified duration or for a
specific job/ assignment, the duration of which is not more than three years.

Remittance of assets permitted under the regulations

Remittances by individuals not being NRIs/ PIOs

ADs may allow remittance of assets by a foreign national where:

i. the person has retired from employment in India;

ii. the person has inherited from a person referred to in section 6(5) of the Act;
iii. the person is a non-resident widow/ widower and has inherited assets from her/ his deceased spouse who
was an Indian national resident in India.
(The remittance should not exceed USD one million per financial year. This limit, however, will not cover sale
proceeds of assets held on repatriation basis. In case the remittance is made in more than one installment,
the remittance of all installments should be made through the same AD on submission of documentary
evidence.)
iv. the remittance is in respect of balances held in a bank account by a foreign student who has completed
his/ her studies, provided such balance represents proceeds of remittances received from abroad through
normal banking channels or rupee proceeds of foreign exchange brought by such person and sold to an AD
branch or out of stipend/ scholarship received from the Government or any organization in India.
These facilities are not available for citizens of Nepal or Bhutan or a PIO.
Remittances by NRIs/ PIOs

ADs may allow NRIs/ PIOs, on submission of documentary evidence, to remit up to USD one million, per
financial year:

a. out of balances in their non-resident (ordinary) (NRO) accounts/ sale proceeds of assets/ assets
acquired in India by way of inheritance/ legacy;
b. in respect of assets acquired under a deed of settlement made by either of his/ her parents or a
relative as defined in Companies Act, 2013. The settlement should take effect on the death of the

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settler;
c. in case settlement is done without retaining any life interest in the property i.e. during the lifetime of
the owner/ parent, it would tantamount to regular transfer by way of gift and the remittance of sale
proceeds of such property would be guided by the extant instructions on remittance of balance in the
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NRO account;
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In case the remittance is made in more than one installment, the remittance of all installments should be
made through the same AD branch. Where the remittance is to be made from the balances held in the NRO
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account, the AD branch should obtain following undertaking from the account holder stating that:

“I/ We undertake that the remittance is sought to be made out of my/ our balance held in the account arising
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from my/ our legitimate receivables in India and not by borrowing from any other person or a transfer from
any other NRO account and if such is found to be the case, I/ we will be liable for any action/penalty under
FEMA.”

Letter of Credit
Letters of credit are governed by UCPDC issued by ICC. Present version is 600 which came into force from
01.07.2007. All LCs whether issued in domestic or international businesses are governed by these rules.
There are different types of credits. They are:

(i) Revocable Credit (not in force now)

(ii) Irrevocable Credit
(iii) Confirmed Credit
(iv) Standby Credit
(v) Deferred Payment Credit
(vi) Transferable Credit
(vii) Back to Back credit/ Countervailing Credit
(viii) Restricted Credit
(ix) Revolving Credit
(x) Red/ Green Clause Credit

Some of the important basic features of these credits are detailed below:

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REVOCABLE Revocable credit is one which is expressed stated to be revocable. It can be
CREDIT cancelled or amended by the Issuing Bank at any time without notice to the
Beneficiary. . However, if the Negotiating Bank has negotiated the documents
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which appear on their face to be in compliance with the terms and conditions of the

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credit before receipt of the notice of amendment/ cancellation, then it becomes
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irrevocable. A problem may arise when the Negotiating Bank has negotiated the
documents but the notice of amendment/cancellation has been received on the
same day after negotiation. As per the latest UCPDC, a credit is always
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irrevocable even if there is no indication to that effect.

Irrevocable credit is a definite undertaking by the Issuing Bank and it cannot be
IRREVOCABLE amended or cancelled without the consent of the beneficiary. The consent of the
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CREDIT Confirming Bank may not be necessary as it can elect not to confirm the
amendments
CONFIRMED When an irrevocable credit is confirmed by the bank nominated by the issuing bank
CREDIT to add its confirmation to the credit, at the request of the Issuing Bank, the credit is
called a confirmed credit. The nominated bank can also be the advising bank to the
credit. Such a confirmation is a definite and clear undertaking by the Confirming
Bank. So far as the seller is concerned, this is the best form of credit to have as he
is assured of payment by a bank in his own country if he presents the documents
asked for in the manner stipulated.
STANDBY LETTER The standby letter of credit is a guarantee declaration in the broadest sense. A
OF CREDIT letter of credit issued in place of a guarantee is known as a standby credit. Strictly
speaking this is not a documentary credit as no document of title will be required to
be submitted under the terms of the credit. It functions similar to a bank guarantee.
Because of the restrictions on the issue of guarantees in certain countries such as
the United States of America, Japan etc. standby letters of credit are common in
those countries. Standby letters of credit can be used , for eg. To guarantee the
following types of payment or performance viz. repayment of loans, fulfillment of
sub contracts, securing the payment of goods delivered by third parties
independent of the recipient etc.
DEFERRED Deferred payment credit is one where payment is made in installments over a
PAYMENT CREDIT period of time by a designated bank on the respective due dates determined in
accordance with the stipulations of the credit without drawing of drafts. In a way, it
is an extended payment credit. Under deferred payment credit, no draft will be
called upon to be drawn, but it must specify the maturity at which payment is to be
made and how such maturity is to be determined. Such credits are normally used
in the import/export of capital goods. Deferred payment credit should not be
confused with installment credit. An installment credit requires specific quantities to
be shipped weekly or monthly and it allows partial shipments and deferred payment
credit may or may not allow partial shipments.
TRANSFERABLE A credit under which the beneficiary has the right to make part or all of the credit
CREDIT available to one or more third parties is known as a transferable credit. A credit can
be transferable if the Issuing Bank specifically states and issues a transferable
credit. A credit is normally not transferable unless specifically issued. A credit is
normally not transferable as it is not a negotiable instrument. The most important
benefit of a transferable credit is that if the Beneficiary is only an intermediary

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between the Applicant and the suppliers of the goods and is keen only on the
spread that he can make, he can earn his profit without tying up his funds. In other
words, the Beneficiary can pass on or transfer the credit to a third party to his profit.
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The credit can be transferred only once. Further partial shipments should be
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allowed and the credit should be irrevocable. The credit could be transferred
subject to the same terms and conditions except for the credit amount, unit price,
the period of validity, the period for shipment and the last date for presentation of
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documents. It is important to note that the same letter of credit is endorsed in

favour of second beneficiaries but the second beneficiaries cannot transfer it to any
third beneficiary.
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BACK TO BACK A back to back letter of credit is issued on the strength of a credit already issued. It
LETTER OF CREDIT is normally used where the exporter is not the supplier of the goods and credit is
not transferable. It should be ensured that the second credit terms are identical to
those of the first credit; the difference being mainly on the date of expiry and the
amount. The second credit must expire before the first credit and the amount of the
second credit will have to be less than that of the first credit. A slight variation of the
back to back credit is the counter credit. The only identifying factor is that the seller
has his own bank (as opposed the Advising Bank/ Confirming Bank) to issue the
credit as a counter to the first one.
RESTRICTED In this type of credit the Issuing Bank will restrict negotiation to a particular bank or
LETTER OF CREDIT normally to their own branches/ correspondent banks to offer business to the
latter.
REVOLVING A revolving letter of credit is one where the amount of credit is reinstated from time
LETTER OF CREDIT to time after negotiation/drawing and reimbursement without any specific or further
amendment. Such drawings have to take place within the validity period. The
amount under the credit can revolve in relation to time or value. There are two
types of revolving credits. In the first case, credit gets reinstated immediately after
a drawing is made. For example, if a credit is opened for USD 100,000 and the
beneficiary draws a bill for USD 25,000; immediately after that drawing, the credit
again reverts to its original amount of USD 100,000. In the second type, the credit
 reverts to the original amount only after it is confirmed by the Issuing Bank i.e. after
the documents reach the Issuing Bank and it pays for the documents/or such fact is
confirmed by the Issuing Bank.
RED/GREEN Red clause letter of credit is a means of financing before shipment and is so called
CLAUSE LETTER because the clause relating to the provision for finance was originally printed in red
OF CREDIT ink on the credit to draw attention to this special feature. This credit is available for
procuring raw materials, manufacturing and packing of the goods to be shipped.
The advance is liquidated from the proceeds of the negotiated documents. The
green clause letter of credit is an extension of the red clause credits in the sense
that it also provides credit for warehousing and insurance charges at port when the
goods are stored pending shipment. In such cases warehouse receipts/warrants
are given as security till shipment in addition to pre-shipment finance under Red
Clause.

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 Parties to a Letter of Credit
THE PRINCIPAL OR This is the party, which asks the bank to open the documentary credit, and is
APPLICANT normally the buyer of the goods or services to be imported.
ISSUING BANK This is the Bank, which issues or establishes the credit.
ADVISING BANK This is the Bank, which advises the beneficiary that a letter of credit has been
opened in his favour. The advising bank does not assume any responsibility,
except for authenticity of the credit and merely acts on behalf of the issuing

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bank.
BENEFICIARY This is the party, who is entitled to receive payment under the credit on
presentation of the documents in terms of the credit, and is usually the
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seller/exporter of the goods/ services to be exported.
SECOND BENEFICIARY
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In case, the letter of credit is transferable and the original beneficiary transfers
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the credit to another party, then the party in whose favour the credit has been
transferred is known as second beneficiary.
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CONFIRMING BANK This is the bank, which adds confirmation to a letter of credit. By adding
confirmation, the confirming bank assumes a firm and independent obligation to
make payment. The confirming bank will not have any recourse to the
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beneficiary once it has made the payment without reserve even though the
issuing bank should later on for one reason or the other not be able to remit the
required cover for payment.
NOMINATED BANK The nomination of a bank by the Issuing bank for negotiation of documents
under a credit does not constitute any undertaking on the nominated bank
unless the credit is confirmed by it. Negotiating Bank may be the bank of the
beneficiary of the credit and/or a bank, which pays value against a set of
documents drawn under a credit. Issuing Bank will reimburse the nominated
bank if it had negotiated the documents as per the terms of the Letter of Credit.
REIMBURSING BANK Reimbursing bank will reimburse the claim made by the negotiating bank or by
any claiming bank under a documentary credit under the authority of the issuing
bank.

DOCUMENTS IN INTERNATIONAL TRADE

Documents used in international trade can be classified into four broad categories:

1- Financial Documents
2- Commercial Documents
3- Transport Documents and
4- Regulatory Documents.

“Financial Document” means/ refers to Bill of Exchange, Promissory Note, Trust Receipt, Delivery Order,
cheques or other similar instruments used for obtaining the payment of money.

“Commercial Document” means invoice, Commercial Invoice, Packing List, Insurance Certificate, Certificate
of Origin, Inspection Certificate, Weight Note, Certificate of Analysis etc.

“Transport Document” means Bill of Lading, Airway Bill, Air Consignment Note, Postal Parcel Receipt, Truck
Receipt, Railway Receipt etc., transport documents, documents of title to goods or other similar documents
whatsoever, not being financial or commercial documents.

BILL OF A Bill of exchange is a negotiable instrument in writing, signed by the maker

EXCHANGE directing a certain person to pay a certain sum of money to or to the order of a third
party. Thus there are three parties to a bill of exchange, viz. I) drawer – the person

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who draws the bill of exchange; ii) drawee – the person who is directed to pay; and
iii) payee – the person to whom the payment is to be made. The bill of exchange
can be classified into two categories – demand bill and usance bill. In the case of a
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demand bill the drawee has to make payment on presentation of the bill whereas in

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the case of a usance bill, the drawee is directed to make payment after a stated
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number of days or a period from a particular date. A usance bill is to be presented
to the drawee for acceptance of the payment. The drawee of a usance bill is not
liable for payment of the bill till he accepts the bill. Bill of exchange is usually drawn
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in the case of acceptance credit.

BILL OF LADING Bill of lading is one of the most important documents used in international trade. It
is a transport document representing movement of goods. It serves three important
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basic functions: (a) It acts as an evidence of a contract of carriage, (b) It acts as a

receipt for the goods taken on board the ship and provides some details about the
condition of goods received, (c) It is a document of title to goods which means that
the holder of the bill of lading has the right to take possession of the goods. The Bill
of lading is a quasi-negotiable instrument. Banks will accept only on board clean
Bill of lading. In other words the Bill of lading should not contain a clause or
notation which expressly declares a defective condition of the goods and/or the
packaging. The Bill of lading should be presented within 21 days from the date of
shipment if no specific time limit for its presentation is stipulated in the credit.

NON-NEGOTIABLE It is similar to Bill of lading except that it is not a document of title to goods and it is
SEAWAY BILL not negotiable. It provided for delivery of the goods to the consignee. When
exporters agree to sell on open account terms, it follows that the exporter should
ask the shipping company for sea waybills rather than for bills lading. The purpose
with open account is for goods to reach the importer with the minimum formality,
and waybills can meet that objective. As soon as the goods reach their destination,
the shipping company will notify the consignee, who will be the importer. The
importer can then collect the goods without the need to produce the waybill. Banks
will accept this bill provided the credit authorizes such acceptance. However, the
bank accepting a waybill has to protect its interest by marking a lien on it or by
naming the bank as the consignee as otherwise they will not have any title to
goods.
MULTIMODAL This transport document will be used when transportation of the goods is done by
TRANSPORT at least two different modes of transport. It is a document of title to goods and
DOCUMENT confers negotiability if it is made out to order or to bearer.
AIR TRANSPORT It is not a document of title to goods. It is merely an acknowledgement of receipt of
DOCUMENT goods. Banks will accept an airway bill provided:
(a) The credit calls for an Air transport document;
(b) It indicates the name of the carrier;
(c) It indicates that the goods have been accepted for carriage;
(d) It is properly dated.

COURIER AND It is not a document of title to goods. It is an acknowledgement of receipt of goods

POST RECEIPT for delivery to a named consignee. Banks will accept such document provided the
credit calls for it.
INSURANCE For the purpose of documentary credits, the insurance document must satisfy the
DOCUMENT following conditions:

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(a) It must be issued and signed by an insurance company or underwriters or its
agent;
(b) If it is issued in more than one original, all the originals must be presented;
(c) An insurance document bearing a date of issuance later than the date of
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loading on or dispatch or taking in charge, then the cover should be effective from
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the date of shipment;
(d) The insurance document must be expressed in the same currency as the credit.
(e) The minimum amount of insurance cover should be at least 110% of c.i.f. value
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if ascertainable from the documents on their face or 110% of the gross invoice
value;

Credits should stipulate the types of insurance cover required. In the absence of
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such stipulations, banks will accept the insurance documents as presented, without
responsibility for any risks not being covered. When a credit stipulates “insurance
against all risks”, banks will accept an insurance document which contains any “all
risks”, notation or clause, whether or not bearing the heading “all risks”, even if the
insurance document indicates that certain risks are excluded without responsibility
for any risk not being covered.

COMMERCIAL It is one of the most important documents used in any trade. It gives the complete
INVOICE description of the goods. Banks will accept commercial invoice under a credit
provided:

(a) It must, appear on its face, be issued by the beneficiary named in the credit;
(b) It must be made out in the name of the applicant;
(c) The description of the goods in the commercial invoice must correspond with
the description in the credit. In all other documents, the goods may be described in
general terms but not inconsistent with the description of the goods in the credit.

It is important to note that a commercial invoice need not be signed. Therefore, if

an importer wants a signed commercial invoice, then LC should stipulate a
condition to that effect. If it is not stipulated in the credit, banks may refuse
commercial invoices issued for amounts in excess of the amount permitted by the
credit. However, if a bank authorized to pay, incur a deferred payment undertaking,
accept draft, or negotiate under a credit accepts invoices its decision will be binding
upon all parties provided such bank has not paid, incurred a deferred payment
undertaking, accepted draft or negotiated for an amount in excess of that permitted
by the credit.

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 Checking of Documents
When the authorized branch is satisfied that the credit is genuine and the letter of credit is in accordance with
our requirements, the documents will be examined to ensure that they are drawn and presented strictly in
accordance with the terms & conditions of the credit. Branches should be guided by the provisions of
Uniform Customs and Practice for Documentary Credits, while examining the documents. If the documents
do not conform exactly to the credit in all respects, the issuing bank may refuse to reimburse the negotiating
bank. It is, therefore, obvious that the checking of documents is a job of responsibility and it must be
entrusted to experienced officers only. All documents shall be checked by two officers independently one of
whom must be Manager or Deputy Manager, before the negotiation is made.

The following important points and provisions of Uniform Customs and Practice for Documentary Credits
must be carefully observed:

Draft/ Bill of Exchange

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1. The draft/ bill of exchange should be drawn on the bank, stipulated in the credit.
2. The amount of bill of exchange/ draft should be for 100% of invoice value, or if otherwise specified
in letter of credit, according to the terms specified. The amount must not exceed the amount
available under the credit. The amount in words and figures must agree.
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3. The required set of draft/ bill of exchange (e.g. first and second of exchange) should be submitted.
4. The tenor of the bill of exchange must be as stipulated in the credit.
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5. The draft/ bill of exchange must bear the reference to the credit under which it is drawn mentioning
the name of the issuing bank’s branch, credit number, date and such other particulars as required in
the letter of credit.
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6. The draft/ bill of exchange should be drawn or endorsed in favour of the bank.
7. The draft/ bill of exchange must bear a date.
8. The draft/ bill of exchange must not be dated after the latest date for negotiation permitted under
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the credit.
9. The draft/ bill of exchange should be signed by the drawer.
10. The draft/ bill of exchange should be drawn unconditionally and should be free from any extraneous
conditions.
11. The draft/ bill of exchange should be drawn for a specified amount and should be consistent with
the terms of drawing permitted in the credit.
12. The draft/ bill of exchange should, unless otherwise specified, be drawn in the same currency as
invoice/ LC.

Commercial Invoice
1. The invoice should be addressed to the party mentioned in the credit.
2. The invoice should be made out by the beneficiary or other authorized person(s) as stipulated in
the LC.
3. The invoice need not be signed.
4. The required number of copies should be submitted.
5. The invoice should be in the prescribed form and certified/ attested by Chambers of Commerce or
the Representative Authority of the Government of the importing country, in the exporting country,
wherever required in terms of credit.
6. The goods must be described exactly as in the credit and the terms of sale i.e. f. o. b., c & f, c. i. f.
etc., quality, quantity, grade, packing, cost, must be precisely the same as required in the credit.
7. The number of packages shipped, gross and net weights, shipping marks mentioned in invoice
must tally with those on the shipping documents.
8. Bill of lading number and date, order number, import licence number and date, if any, should be
given on the invoice, wherever required in credit. Particulars must tally with those stated in
 shipping documents.
9. The amount of the invoice must be within the amount authorized in the letter of credit.
10. The invoice must be dated not later than the expiry date of the credit.
11. Any discount/commission shown in the invoice must be in terms of credit and subject to
compliance of FEMA Regulations.
12. The invoice should be drawn in the same currency as LC unless otherwise specified.
13. Arithmetic calculations should be accurate.
14. It should not include any charges, which are not permitted by LC. As per stipulations of LC, the
gross value of invoice should not exceed the credit amount.

Insurance Documents
1. The documents presented must be that as called for in the credit. A certificate or cover note cannot
be accepted unless specifically authorized in the credit.
2. It must be issued only by Insurance Company or underwriters or their agents.
3. It should not be issued by brokers.
4. It must be signed by the issuer.

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5. It must bear the date of issuance.
6. It must indicate the name of the assured.
7. It must indicate the mode of conveyance (Air, Sea, Road etc.) and if possible the name of the
vessel, voyage number etc.
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8. All the risks required to be covered in the credit should have been covered.
9. The value of the insurance policy/certificate must be as per requirements of the credit but in any
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case not less than invoice value of the goods.
10. Unless otherwise specified, it should be issued for an amount equivalent of 110% of CIF/ CIP value
of the goods. If such value is not determinable from the documents on their face, it should be for
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the minimum amount of the negotiation requested for or the amount of invoice value whichever is
greater.
11. Insurance policy/ certificate must be in the same currency as in the letter of credit but in any case
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not less than invoice value of the goods and the claims should be payable at the centre stipulated
in the credit.
12. The insurance policy/ certificate must not be dated later than the date of the bill of lading or date of
shipment unless the insurance documents presented establish that the cover is effective at the
latest from the date of shipment or dispatch.
13. Insurance policy/ certificate should be in negotiable form and should be properly endorsed.
14. The insurance policy must be properly stamped.
15. If the name of the steamer is mentioned in the insurance policy, it must agree with the name given
in the bill of lading.
16. The insurance policy/certificate must bear a description of merchandise which conforms to the
terms of the credit and allows identification with the other documents presented.
17. If transshipment is to take place, the insurance documents must cover transshipment. (It may be
noted that the normal “Institute warehouse to warehouse clause” covers customary trans-
shipment).
18. If the credit permits shipping on deck and bill of lading indicates shipment of goods on deck, the
insurance policy must cover the risk.
19. In case of exports contracted on f.o.b. or c & f terms, it should be ensured that the shipment has
been adequately insured against all risks of loss or damage during the entire course of transit and
that such insurance cover incorporates “Seller’s interest clause” in the relative policy, permitting
claims being paid to exporter in India, in the event of loss/damage to the shipment before
ownership of goods passes to the buyer.
20. If it is issued in more than one original, all originals must be submitted (no. of negotiable copies
issued are indicated in the insurance policy / certificate).
21. It should be endorsed in blank by the assured, if required as per terms of LC.
22. It should indicate the port of shipment and destination or point of insurance coverage and point of
termination of insurance coverage.
23. It should not contain any clause affecting the interest of the assured/assignees.

Bill of Lading

1. The complete set of bills of lading i.e. all the original negotiable copies must be submitted unless
the credit provides otherwise. It should be noted that a shipping company would deliver the
goods against the first presented and correctly endorsed negotiable copy.
2. The bill of lading should have been manually signed. (Signatures by rubber stamp are not
acceptable.) Bill of lading should normally be signed by the master of the ship or on his behalf by
the authorized agent.
3. The bill of lading must be clean i.e. it should not contain any super imposed clause indicating any
defect in the goods or in their packing. Any such mention will render the bill of lading “unclean”,
“dirty”, “foul” which is not a good tender under a credit, unless specifically authorized in the credit.
4. The bill of lading must indicate that the goods are shipped “on board” a named vessel, “Received
for shipment” bills of lading should not be accepted unless specifically provided for in the credit. If

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“received for shipment” bill of lading is over-stamped “on board”, the bill of lading is acceptable,
as being “on board” bill of lading, provided the over-stamping is authenticated and dated. The
date so indicated should be within the latest date of shipment stipulated under the credit.
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5. The date of bill of lading should not be after the stipulated last date of shipment in the credit. It

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should also not be prior to the date of issuance of letter of credit.
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6. The shipping marks in the bill of lading should be identical with those on other documents. The
general description of the goods in the bill of lading must be in accordance with that called for in
the credit.
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7. Number of packages and weight in the bill of lading should be the same as shown in commercial
invoice and other documents.
8. “Shipper”, “consignee” and “to be notified” parties in the bill of lading must be in accordance with
the stipulations of the credit.
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9. Bill of lading must be made out to the order of the party named in the letter of credit.
10. If the goods are being shipped on “c.i.f.” or “c&f” basis, the bill of lading must evidence “freight
paid”. Where freight pre-paid bills of lading are required, clauses like “freight to be pre-paid” or
“freight pre-payable” will not be accepted as constituting evidence of the payment of freight.
11. The port of shipment or the port of destination should be as required in the credit.
12. The bill of lading along with other documents must be presented within the time specified in the
credit.
13. Bill of lading must;

a. Be issued by a named carrier or his agent.

b. Bear a distinct number.
c. Indicate the place of issuance.
d. Indicate the date of issuance.
e. Indicate the name of consignor.
f. Indicate the name of consignee.
g. Indicate brief description of goods being carried.
b. Must indicate whether “freight prepaid” or “freight payable”.

14. Unless specifically authorized in the credit, bills of lading of the following nature should not be
accepted:

a. Bill of lading issued by forwarding agent.

b. Bill of lading issued under and subject to the conditions of a charter party.
 c. Bill of lading covering shipment by sailing vessel.
d. Bill of lading evidencing goods shipped “on deck”.

1. Bill of Lading can (unless otherwise prohibited or is inconsistent with other terms of LC)

- Be a short form or Blank backed B/L.

- Indicate a place of taking in charge different from the port of loading and/or a place of final
destination different from the port of discharge.
- Indicate that the goods are carried in containers trailers/or ‘LASH’ barges.
- Be issued by freight forwarder provided it is issued in his capacity as a carrier or his agent.
- Contain a notation that the goods may be carried on deck provided it does not specifically
state that they are or will be loaded on deck.
- Indicate that the goods will be transshipped provided the same B/L covers the entire carriage.
- Be a “Freight Payable” B/L.
- Evidence freight prepayment by a stamp or otherwise on B/L to that effect like “Freight
Prepaid.
- Bear reference by stamp or otherwise to costs additional to freight charges.

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- Show clauses such as “Shippers load and count” or “said by shipper to contain” etc. with
reference to goods covered by the B/L.
- Show shipper as a third party other than beneficiary.
- Be deemed as “Clean on Board” if it is an on board B/L without any super imposed clauses or
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notations expressly declaring the defective condition of the goods and or the packaging.
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OTHER ASPECTS OF B/L

1. If a B/L is issued as “ON Board” B/L, it must indicate the name of the carrying vessel.
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2. A Charter party B/L need not show the name of carrier.

3. A transport document issued by a freight forwarder can be accepted provided freight forwarder has
issued the same in his capacity as a carrier or his agent and all other requirements are met with.
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4. A B/L received for shipment can be treated as an “On Board” B/L if received for shipment B/L is
affixed with “On Board” notation duly signed or initialed and dated by the carrier or his agent.
5. If LC calls for a “Marine B/L” without specifying whether it should be “On Board” or “Received
for shipment”, only “ On Board” B/L will be accepted.
6. Date of issue of B/L or “On Board” notation should be dated prior to the shipment date permitted
under LC.
7. Shipping marks, Gross/et weight etc. specified on B/L must correspond to those specified in other
documents.

Airway Bill or House Airway Bill ( HAWB )

1. It must show the name of the carrier.

2. It must be issued by a named carrier or his agent.
3. It must indicate the place of issuance.
4. It must indicate the date of issuance.
5. It must be signed by a named carrier or his agent (In case of HAWB by the Air Cargo consolidator
himself).
6. It must indicate the name of the consignor.
7. It must indicate the name of the consignee (and not that of the consignor or his order)
8. It must indicate port of loading and discharge.
9. It must give brief description of goods being carried and not inconsistent with other documents.
10. Must comply with all other specific requirements of LC.
11. Must indicate notify parties as stipulated in the LC.
 12. It should not be a charter party AWB.
13. It should not be claused.

Unless prohibited by the terms of LC,

1. It can be short form AWB or Blank backed AWB.

2. It can bear reference by stamps or otherwise to cost anything additional to freight charges.
3. It can contain words like “said by shipper to contain” or “shippers load and count” etc.
4. It can show the consignor as a third party other than beneficiary.
5. It must show the shipping marks of packages, number of packages, gross weight, net weight etc.
6. It must indicate whether freight is prepaid or payable at destination.
7. In case of HAWB ( if specified) it must show the name of Airlines, Master Airway Bill number, the
flight number, consolidator’s IATA registration number.
8. It should be remembered that unless credit calls for flight date even if flight date is shown on AWB,
the date of issue of AWB is considered as date of shipment.

Other Documents

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A letter of credit may call for certain other documents like certificate of origin, packing lists, Health
certificate, pre shipment inspection report, weight notes, test reports, warehouse receipts, delivery orders,
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consular invoice, certificate of quality or of analysis etc. Branches should ensure that all such documents

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required under the letter of credit have been presented and all the particulars stated therein are correct. If
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any particular document is required in a specified form, it should have been presented in that form
only. Documents required to be attested by organizations specified in the credit should be presented after
completion of all the requisite formalities.
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Whenever such documents are called for under L/C, following aspects must be checked in the documents:
1. The documents are presented in requisite number of copies
2. It is issued by the person or authority specified in the credit. If no specific mention is made
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regarding issuer of the document, banks can accept document issued by any person provided their
data content is not inconsistent with any other stipulated document presented.
3. It is dated and signed by the person/authority concerned.
4. Whether they relate to the goods/shipment covered by the documents or not.
5. Whether the document certifies the facts required as per LC or not.
6. Whether the details mentioned in such certificates/documents are consistent with other
documents or not.

 
 Exchange Rate Mechanism

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Basics of Exchange Rate

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The exchange rate is the rate at which one currency is converted to another. The need for conversion arises
because the currency of a country is legal tender only in that country. and not in any other country. The
primary function of a currency is that it acts as medium of exchange for goods and services within the
country. Foreign currency when brought to a country though retains its value cannot perform the function of
local currency.

Direct and Indirect Quotes

Though foreign currency is just another commodity quoting a price for it poses a special problem as the
commodity itself is a currency. Price of either of the two currencies can be expressed in terms of the other.
Both quotes are equally valid and convey the same information.

There are two accepted methods of quoting exchange rates in the market. In the first method, price of one
unit of Foreign Currency is expressed in terms of the number of equivalent units of home currency. This is
called a direct quote and is most commonly used. This is consistent with our commodity analogy of a
foreign currency. Saying that 1 USD = Rs. 61.20 is no different from saying that 1 K.G of apple = Rs. [Link]
direct quote base currency is the foreign currency and the home currency is the variable currency.

For example, in India:

1 USD=Rs. 74.93 or 1 GBP=Rs. 94.50

There are a few currencies that are quoted in the reverse mode in number of units of foreign currency
equivalent to one unit of home currency. This method is called indirect quote. Here the base currency is
home currency and foreign currency is the variable currency. Till 1993 INR was also quoted in indirect mode.
Base Currency:

A foreign currency can be compared to a commodity and can be bought and sold in the same way as a
commodity but there is a slight difference in buying/selling of a foreign currency and commodities. Unlike in
case of commodities in case of FC,2 currencies are involved. Therefore it is necessary to know which
currency is bought and sold and the same is known as “base currency”. In a direct quote it is the foreign
currency which is bought and sold and hence the base currency while in Indirect quote it is home currency
that is bought and sold and hence is the base currency. For eg if a bank quotes 1 USD=Rs. 74.18/74.20 it
indicates that it is prepared to deal in USD ie the base currency. It is prepared to buy USD at Rs. 74.18 and
sell USD at Rs. [Link] it may be noted that the first rate is always the buying rate and the second rate is
the selling rate.
Two way quotations:

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The foreign exchange quotation between banks will have two rates- one at which the quoting bank is willing
to buy and the other at which it is willing to sell the foreign currency. The lower of the two rate is the buying
rate and the higher is the selling rate. For eg if the exchange rate between Indian Rupee and US Dollar is
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quoted as USD1= Rs 74.18-74.25 the buying rate is 74.18 and the selling rate is 74.25. It is customary in the

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foreign exchange market to always quote two way rate ie one rate for buying and another for selling. This
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eliminates the risk of being given a bad rate ie if a party comes to know what other party intends to do ie buy
or sell the former can take an “undue advantage”.
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Bid and offer rate:

The buying rate is also known as the Bid rate and the selling rate as the OFFER rate. The difference
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between these rates is the profit for the bank and is known as the SPREAD. If the quoting bank is quoting a
rate as 1GBP=USD 1.4265/ 4275 he is prepared to buy GBP at USD 1.4265 .This rate is also known as “bid
rate”. He is prepared to sell GBP at USD1.4275 and this rate is known as “offer rate”.
Spread:

The difference between buying and selling rate (bid & offer rates) is known as spread. In the above eg we
can see there is a spread of 10 pips between the buying and selling rates which according to the quoting
bank is sufficient to take care of the exchange rate fluctuation at that point of time.
Value Date:

In foreign exchange transactions it takes some time to process the transactions and send instruction to the
concerned bank abroad. Therefore it is customary to finalize the deal but the exchange of currencies is
generally not on the same day but afterwards.
Value date therefore is the date on which exchange of currencies actually takes place irrespective of date of
deal. Based on the concept of value date we have the following type of exchange rates in the market.

Type of Deal Date of Deal Value Date

Cash/ Ready 03.04.2020 Friday 03.04.2020 Friday
TOM 03.04.2020 Friday 06.04.2020 Monday
SPOT 03.04.2020 Friday 07.04.2020 Tuesday
Forward 03.04.2020 Friday 08.04.2020 Wednesday onwards
Only Saturday and Sunday are being treated here as holiday for explaining the example above.

Premium or Discount

When a currency is costlier in future (forward) as compared to spot the currency is said to be at a premium
vis-à-vis other currency. Premium is always added to both buying and selling rates. When a currency is
cheaper in future (forward) as compared to spot the currency is said to be at a discount vis-à-vis other
currency. Discount is always deducted from both buying and selling rates. It may be noted that it is the base
currency for which premium/discount is mentioned. Base currency is the currency that is bought and sold
and other currency is incidental.

Merchant Rates

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Importers and exporters and others who are required to buy and sell FC are popularly known as “Merchants”
RBI has authorised commercial banks to undertake merchant transactions as per guidelines laid down by
RBI. The Foreign Exchange Dealers Association of India (FEDAI) acts as facilitating body and in consultation
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with RBI frames rules and regulations for authorise dealers in India for conduct of foreign exchange

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business. The rates quoted by ADs for their merchant transactions are known as “merchant rates”
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Types of Rates
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Following are the main types of merchant rates:

1- TT (Buying)
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2- BILL (Buying)
3- TT (Selling)
4- BILL (Selling)

TT stands for Telegraphic Transfer although funds need not be received by telegram

TT (Buying) Rate

This is the rate applied when the Nostro account of the bank would already have been credited and the
transaction does not involve any delay in realisation of the foreign exchange by the bank. It is applied when
bank pay rupee funds on or after the receipt of FC. E.g. being payment of an inward remittance or an export
bill sent on collection basis realised and credited to the nostro account. Best rates are quoted for TT
(buying). The rate is calculated by deducting from the interbank buying rate the exchange margin.

Bill (Buying) Rate

This rate is applied when a foreign export bill is purchased/negotiated as the proceeds will be realized by the
bank after the bill is presented to the drawee at the overseas centre. This is applied for export bills. The rate
will be worse than that is applied for TT (Buying) owing to the additional handling cost.

TT (Selling) Rate
This is the rate to be used for all transactions which do not involve handling of documents by the bank. This
is applied when bank simultaneously parts with FC on receipt of rupees in [Link] selling rates is applied for
all outward remittances other than for imports payments. In such cases though rupee funds are received
immediately FC is paid only when remittance reaches the beneficiary at the foreign centre. Bank has the
advantage of float funds in its Nostro account and thus TT (Selling) rate is worked out with minimum amount
of profit loaded. It is calculated by adding margin to the interbank rate.

Bill (Selling) Rate

Bill (Selling) rate has a large factor of profit loaded into it because bank handles documents, scrutinizes
licenses and additionally banks are responsible for presentment of documents and follow up of payments.
This rate will thus be worse for the importer client than TT (Selling) rate.

Application of Exchange Rate

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TT Buying Rate a) Clean inward remittances for which cover has already been provided to the
Nostro account of the Bank.
b) Conversion proceeds of instruments sent on collection basis.
c) Cancellation of outward TT/ MT/ DD etc.
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d) Cancellation of forward sale contract.
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Bill Buying Rate Purchase/ discount/ negotiation of export bills
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TT Selling Rate a) Clean outward remittance in FC by TT/ MT/ DD.

b) Cancellation of purchased bills on return or transfer to collection account.
c) Cancellation of forward purchase contract.
d)Import documents received directly by the importer.
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Bill Selling Rate Transactions involving remittance for imports except 3(d) above.

Base rate:

Base rate is the rate which forms the basis of both spot and forward rates and the same is arrived at from
cover rate. It is done by loading some cushion in the cover rate for guarding against any adverse movement
in the exchange rate after committing a rate till the position is covered. ADs in their own interest will ensure
that base rate is arrived at after due consideration to the position, market trend, matching transactions etc.
Therefore the interbank rate on the basis of which the bank quotes its merchant rate is known as the base
rate.

Margin:

Margin is the profit loaded into the base rate for finalising the merchant rate. Earlier FEDAI had prescribed
profit margin to be loaded by the ADs but now ADs are free to charge profit margin as per their discretion.
Card Rates:

Card rates are rates applied by AD for small value transactions so as to avoid disturbing the dealer every
now and then. Every bank is free to fix its card rates.
 International Commercial Terms (INCOTERMS)
INCOTERMS are a set of three-letter standard trade terms most commonly used in international contracts for
the sale of goods. First published in 1936, INCOTERMS provide internationally accepted definitions and
rules of interpretation for most common commercial terms.

The International Chamber of Commerce created INCOTERMS as a worldwide standard to be used in

contracts of sale for expressing the rights and obligations of buyers and sellers specifically, regarding the
delivery of the goods.

INCOTERMS were last updated by ICC in 2010 and effective from 01.01.2011 are still in use.

INCOTERMS explains the sales contract by defining the respective obligations, costs and risks involved in
the delivery of goods from the Seller to the Buyer.

INCOTERMS cover:

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who does what, who pays for what, when risk in the goods passes from seller to buyer, when delivery
occurs, as well as issues such as insurance, export and import clearance and the allocation of other costs
pertaining to the delivery of goods.
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INCOTERMS do not cover:

Ownership/ title to the goods, detail on payment obligations (when, how, what security, against what
documents), detailed vessel requirements, force majeure, termination, insolvency i.e. INCOTERMS do not
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constitute a complete contract of sale, and only provide convenient, internationally recognized rules for the
sale of goods. They work well as general outline of the contract of sale which is to be specified and adjusted
with further terms and conditions of the contract.
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Rules for any Mode of EXW Ex Works

Transport FCA Free Carrier
CPT Carriage Paid To
CIP Carriage and Insurance Paid To
DAT Delivered at Terminal
DAP Delivered at Place
DDP Delivered Duty Paid
Rules for Exclusive FAS Free Alongside Ship
Seaway FOB Free On Board
CFR Cost and Freight
CIF Cost Insurance and Freight

INCOTERMS and their Meaning:

EXW “Ex Works” means that the seller delivers when it places the goods at the disposal of the
buyer at the seller’s premises or at another named place (i.e., works, factory, warehouse,
etc.). The seller does not need to load the goods on any collecting vehicle, nor does it need to
clear the goods for export, where such clearance is applicable.

FCA “Free Carrier” means that the seller delivers the goods to the carrier or another person
 nominated by the buyer at the seller’s premises or another named place. The parties are well
advised to specify as clearly as possible the point within the named place of delivery, as the
risk passes to the buyer at that point.

CPT “Carriage Paid To” means that the seller delivers the goods to the carrier or another person
nominated by the seller at an agreed place (if any such place is agreed between parties) and
that the seller must contract for and pay the costs of carriage necessary to bring the goods to
the named place of destination.

CIP “Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or
another person nominated by the seller at an agreed place (if any such place is agreed
between parties) and that the seller must contract for and pay the costs of carriage necessary
to bring the goods to the named place of destination. The seller also contracts for insurance
cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer
should note that under CIP the seller is required to obtain insurance only on minimum cover.

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Should the buyer wish to have more insurance protection, it will need either to agree as much
expressly with the seller or to make its own extra insurance arrangements.

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DAT “Delivered at Terminal” means that the seller delivers when the goods, once unloaded from
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the arriving means of transport, are placed at the disposal of the buyer at a named terminal at
the named port or place of destination. “Terminal” includes a place, whether covered or not,
such as a quay, warehouse, container yard or road, rail or air cargo terminal. The seller bears
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all risks involved in bringing the goods to and unloading them at the terminal at the named port
or place of destination.
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DAP “Delivered at Place” means that the seller delivers when the goods are placed at the disposal
of the buyer on the arriving means of transport ready for unloading at the named place of
destination. The seller bears all risks involved in bringing the goods to the named place.

DDP “Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at
the disposal of the buyer, cleared for import on the arriving means of transport ready for
unloading at the named place of destination. The seller bears all the costs and risks involved
in bringing the goods to the place of destination and has an obligation to clear the goods not
only for export but also for import, to pay any duty for both export and import and to carry out
all customs formalities.

FAS “Free Alongside Ship” means that the seller delivers when the goods are placed alongside the
vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment.
The risk of loss of or damage to the goods passes when the goods are alongside the ship, and
the buyer bears all costs from that moment onwards.

FOB “Free On Board” means that the seller delivers the goods on board the vessel nominated by
the buyer at the named port of shipment or procures the goods already so delivered. The risk
of loss of or damage to the goods passes when the goods are on board the vessel, and the
buyer bears all costs from that moment onwards.
CFR “Cost and Freight” means that the seller delivers the goods on board the vessel or procures
the goods already so delivered. The risk of loss of or damage to the goods passes when the
goods are on board the vessel. the seller must contract for and pay the costs and freight
necessary to bring the goods to the named port of destination.

CIF “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or
procures the goods already so delivered. The risk of loss of or damage to the goods passes
when the goods are on board the vessel. The seller must contract for and pay the costs and
freight necessary to bring the goods to the named port of destination. The seller also contracts
for insurance cover against the buyer’s risk of loss of or damage to the goods during the
carriage. The buyer should note that under CIF the seller is required to obtain insurance only
on minimum cover. Should the buyer wish to have more insurance protection, it will need
either to agree as much expressly with the seller or to make its own extra insurance
arrangements.

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Uniform Customs and Practices for Documentary Credit – (UCPDC – 600)

UCPDC is published by the International Chambers of Commerce. The present version (UCPDC

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600) is in use since 01.07. 2007.

First uniform rules were published by ICC International Chambers of Commerce in 1933. Revised
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versions were issued in 1951, 1962, 1974, 1983, 1993 and the present version in 2007 came into
force from 1st July, 2007.
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There are 39 articles in the present version.
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Article Related Areas

1- 5 General Provisions and Definitions
6- 13 Liabilities and Responsibilities
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14-17 Examination of Documents

18-28 Documents
29-33 Miscellaneous Provisions
34-37 Disclaimers
38-39 Transferable Credit and assignment

Articles can be shown as under:

Article 1
Application of UCP: The Uniform Customs and Practice for documentary Credits 2007,
Revision ICC Publication No 600 are rules that apply to any documentary credit when
the text of the credit expressly indicates that it is subject to these rules. They are
binding on all parties thereto unless expressly modified or excluded by the credit.
• UCP 600 are rules that apply to any documentary credit and any standby letter
of credit when the text of the credit expressly indicates it is subject to these
rules. These rules are binding on all parties there to. UCP are rules not Law:
UCP governs documentary Credit primarily, but not solely.
• UCP does not prevent a Court from applying its country's national law

Article 2
Definitions of Advising bank, Application, Banking day, Beneficiary, Complying
 presentation, Confirmation , Confirming bank, Credit, Honour, Issuing bank,
Negotiation, Nominated Bank, Presentation, Presenter
• Credit means any arrangement however named or described that is
irrevocable and thereby constitutes a definite undertaking of the issuing bank
to honour a complying presentation.
Complying presentation means a presentation that is in accordance with the
terms and conditions of the credit, the applicable provisions of these rules and
international standard banking practice
• Honour means: To pay at sight if the credit is available by sight payment. To
incur a deferred payment undertaking and pay at maturity if the credit is
available by deferred payment .To accept a bill of exchange drawn by the
beneficiary and pay at maturity if the credit is available by acceptance.
• Negotiation means the purchase drafts or documents by the nominated bank
under a complying presentation, by advancing or agreeing to advance funds to
the beneficiary.

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• Nominated bank means the bank with which the credit is available.
• Presentation means either the delivery of documents under a credit to the
issuing bank or nominated bank or the documents so delivered. Presenter
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means a beneficiary, bank or other party that makes a presentation.
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Article 3 Interpretations of some terms like from, after, before, between, till, until, to, first half
and second half of the month, beginning middle and end of the month.
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• First half of the month means 1st to 15thday.

• 2nd half of the month means 16th to last day of the months all dates inclusive.
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• Beginning of the month means: 1st to10th

• Middle of the month means: 11th to 20thday
• End of the month means: 21th to the last day of the month, all dates inclusive.

Article 4 Credit vs. Contracts

• A credit by its nature is a separate transaction from the sale or other contract.
Banks are in no way concerned with or bound by such contract, even if any
reference to it is included in the credit.
• Bank should discourage to include contract, proforma invoice, as an integral
part of the credit

Article 5 Documents vs. Goods, Services or Performance

Banks deal with documents and not with goods services or performance to which
documents may relate.

Article 6 Availability, Expiry Date and Place for Presentation

• A credit must state the bank with which it is available or whether it is available
with any bank. A credit available with a nominated bank is also available with
the issuing bank
• A credit must state whether it is available by sight payment, deferred
payment, acceptance or negotiation.
 • An expiry date is also the last date of presentation.
• The place of the bank with which credit is available is the place for presentation

Article 7 Issuing Bank Undertaking

• Honor complying presentation made to nominated bank or to issuing bank itself.
• Reimburse nominated bank that has honored/negotiated and forwarded
complying documents to issuing bank.
• For usance L/C, reimbursement is due at maturity of deferred payment
undertaking or acceptance, whether or not nominated bank prepaid or
purchased before maturity.
• Issuing bank’s undertaking to reimburse nominated bank is
independent of its undertaking to beneficial.

Article 8 Confirming Bank Undertaking

• Honor a complying presentation, or negotiate without recourse.

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• Reimburse nominated bank that has honored/negotiated and forwarded
complying documents to confirming.
• For usance L/C, reimbursement is due at maturity of deferred payment
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undertaking or acceptance, whether or not nominated bank prepaid or

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purchased before maturity.
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• Confirming bank’s undertaking to reimburse nominated bank is
independent of its undertaking to beneficiary.
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Article 9 Advising of Credits and Amendments

• Advising bank signifies the apparent authenticity of the credit and amendment.
• A credit and its amendment must be advised by the same bank
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Article 10 Amendments
• Thebeneficiaryshouldgivenotificationofacceptanceorrejectionofamendment.I
f the beneficiary fails to give such notification, a presentation that complies
with the credit and to any not yet accepted amendment will be deemed to
be notification of acceptance.
• Partial acceptance of an amendment is not allowed.

Article 11 Tele transmitted and Pre-Advised Credits and Amendments

• An authenticated Tele transmission of a credit or amendment will be
deemed operative.
• If tele- transmission states full details to follow „then tele -transmission
not be deemed to be operative. Then issuing bank must issue the
operative credit or amendments without delay in terms not
inconsistent with the tele–transmission

Article 12 Nomination
• Nomination does not obligate nominated bank to honour.
• By nominating a bank to accept a draft or incur a deferred payment
undertaking, an issuing bank authorizes that nominated bank to prepay or
 purchase a draft accepted or a deferred payment undertaking incurred by that
nominated bank.

Article 13 Bank-to-Bank Reimbursement Arrangements

• If a credit states that reimbursement is to be obtained by a nominated bank
(claiming bank) claiming on another party(reimbursing bank), the credit must
state if the reimbursement is subject to the ICC rules for bank-to-bank
reimbursements in effect on the date of issuance of the credit.

Article 14 Standard for Examination of Documents

• Nominated bank, confirming bank and the issuing bank each have a maximum
of five banking days following the presentation date to determine if a
presentation is complying documents.
• This period is not curtailed or otherwise affected by the occurrence on or after
the date of presentation of any expiry date or last day for presentation.

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• Data in a document need not be identical but must not conflict with data in that-
document, any other stipulated document or the credit.
• The description of the goods in other than commercial invoice may be in
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general terms not conflicting with their description in the credit

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• A document may be dated prior to the issuance date of the credit, but must not
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be dated later than its date of presentation.

Article 15 Complying Presentation

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• When an issuing bank determines that a presentation is complying, it must

honor it.
• When a confirming bank determines that a presentation is complying, it must
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honor or negotiate and forward the documents to the issuing bank.

• When a nominated bank determines that a presentation is complying and
honors or negotiates, it must forward the documents to the confirming bank or
issuing bank

Article 16 Discrepant Documents, Waiver and Notice

• Refusal notice must state each discrepancy in a single notice.
• Notice must state that the bank is holding the documents until it receives a
waiver from the applicant or receive further instructions from the presenter prior
to agreeing to accept a waiver, or that the bank is returning the documents
• Notice must be given by telecommunication or, if that is not possible, by other
expeditious means within the fifth banking day following the day of
presentation

Article 17 Original Documents and Copies

• At least one original of each document must be presented.
• Any document bearing an apparently original signature mark, stamp, or written,
typed, performed by the issuers hand or issued on issuers original stationery or
state that it is original to be accepted as origina documents.
• A document either labeled ‘copy’ or not marked as an ‘Original’ is a copy
 document which need not be signed

Article 18 Commercial Invoice

• Commercial Invoice to be issued by the beneficiary in the name of the
applicant/ first beneficiary in the same currency as the credit and need not be
signed.
• Bank may accept a commercial invoice issued for an amount in excess,
provided the excess amount has not been honored or negotiated.

Article 19 Transport Document covering at least Two Different Modes of Transport

• Must appear to indicate name of carrier
• Signed by carrier, master or named agent.
• If signed by agent, need to specify for whom carrier or master it is signed.
• If signed by agent, need to specify for whom carrier or master it is signed.
• Indicating goods have been dispatched, taken in charge or shipped onboard.

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• Must indicate place of dispatch, taking in charge or shipment and place
of final destination stated in the L/C
• Must indicate place of dispatch, taking in charge or shipment and place
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of final destination stated in the L/C.

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• Be the sole original transport document or, if issued in more than one original,
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be the full set as indicated on the transport document.

Article 20 Bill of Lading

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• B/L must indicate the name of the carrier, also to indicate that the goods
have been shipped on board a named vessel from the port of loading to the
port of discharge and be the sole original B/L.
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• B/L must be signed by the carrier, or a named agent or the muster

identifying their status.
• Transshipment is acceptable if the goods have been shipped in a container,
trailer or LASH barge and the entire carriage is covered by one and the same
bill of lading

Article 21 Non-negotiable sea waybill

• A non-negotiable sea waybill must indicate the name of the carrier and be signed
• The carrier or a named agent for or on behalf of the carrier.
• The master or a named agent for or on behalf of the master.
• Any signature by the carrier, master or agent must be identified as that of the
carrier, master or agent.
• Indicate that the goods have been shipped on board a named vessel at the
port of loading stated in the credit
• The date of issuance of the non-negotiable sea waybill will be deemed to be
the date of shipment unless otherwise stated.
• Indicate shipment from the port of loading to the port of discharge stated in the
credit

Article 22 Charter Party Bill of Lading

 • A bill of lading, however named, containing an indication that it is subject to a
charter party (charter party bill of lading), must appear to be signed by the
master or a named agent for or on behalf of the master, or the owner or a
named agent for or on behalf of the owner, or the charterer or a named agent
for or on behalf of the charterer.
• Indicate that the goods have been shipped on board a named vessel at the
port of loading.
• Indicate shipment from the port of loading to the port of discharge stated in the
credit.
• A bank will not examine charter party contracts, even if they are
required to be presented by the terms of the credit

Article 23 Air Transport documents

• An air transport document, however named, must appear to indicate the name
of the carrier and be signed by the carrier, or a named agent for or on behalf

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of the carrier.
• Any signature by the carrier or agent must be identified as that of the carrier or
agent and any signature by an agent must indicate that the agent has signed
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for or on behalf of the carrier An air transport document must indicate the date

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of issuance which will be deemed to be the date of shipment unless the air
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transport document contains a specific notation of the actual date of shipment,
in which case the date stated in the notation will be deemed to be the date of
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shipment.

Article 24 Road, Rail or Inland Waterway Transport Documents

• A road, rail or inland waterway transport document, however named, must appear
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to
• Indicate the name of the carrier and be signed by the carrier or a named agent
for or on behalf of the carrier, or indicate receipt of the goods by signature,
stamp or notation by the carrier or a named agent for or on behalf of the
carrier.
• A road, rail or inland waterway transport document bearing any signature,
stamp or notation of receipt of the goods by the carrier or agent must be
identified as that the carrier or agent.

Article 25 Courier Receipt, Post Receipt or Certificate of Posting

Article 26 On Deck, Shipper's Load and Count, Said by Shipper to Contain and Charges additional to
Freight
• A transport document must not indicate that the goods are or will be loaded on
deck. A clause on a transport document stating that the goods may be loaded
on deck is acceptable.
• Atransportdocumentbearingaclausesuchas„shipper'sloadandcount‟and„said
by shipper to contain‟ is acceptable.
• A transport document may bear a reference, by stamp or otherwise, to
charges additional to the freight
Article 27 Clean Transport Document
• A bank will only accept a clean transport document. A clean transport
document is one bearing no clause or notation expressly declaring a
defective condition of the goods or their packaging.
• The word „clean‟ need not appear on a transport document.

Article 28 Insurance Document and Coverage

• Insurance document such as insurance policy, an insurance certificate or a
declaration under an open cover must be signed by the company, an
underwriter or their agents or their agents or their proxies.
• Cover note will not be accepted.
• If insurance amount is not indicated in the credit then coverage must be
at least 110% of CIF or CIP value of the goods.

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Article 29 Expiry date of credit
• If the expiry date of a credit falls on a holiday the expiry date will be extended
to the first following banking day and the nominated bank will provide a
statement that the presentation was made within the time limit extended.
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Article 30 Tolerance in Credit Amount, Quantity and Unit Prices

• The words 'about' or approximately allowing a tolerance not to exceed 10%

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more or less than the amount, the quantity or the unit price to which they
refer.
• A tolerance not to exceed 5% more or less than quantity of goods is allowed,
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provided the quantity is not stated in number of packing units or individual

items and the drawing amount is within the credit value.

Article 31 Partial Drawings or Shipments

More than one set of transport documents of the same means of conveyance and for the
same journey and destination will not be regarded as partial shipment. If it is more than one
means of conveyance then it will be regarded partial shipment

Article 32 Installment Drawings or Shipments

• If a drawing or shipment by installments within given periods is stipulated in
the credit and any installment is not drawn or shipped within the period
allowed for that installment, the credit ceases to be available for that and any
subsequent installment

Article 33 Hours of Presentation

A bank has no obligation to accept a presentation outside of its banking hours

Article 34 Disclaimer on Effectiveness of Documents

• A bank assumes no liability for accuracy genuineness or legal effect of any
document nor does it assume any liability for the description, quantity, weight,
quality or existence of the goods
Article 35 Disclaimer on Transmission and Translation
• A bank assumes no liability for the consequences arising out of delay, loss in
transit of any messages, letter or documents. If a complying document is lost
in transit the issuing bank must honor or negotiate or reimburse the
nominated bank.

Article 36 Force Majeure Acts of God, riots, civil commotions, insurrections, wars, acts of terrorism or
by any strikes or lockouts or any other causes beyond its control.
• A bank assumes no liability or responsibility for the consequences arising out
of the interruption of its business by Acts of God, riots, civil commotions,
insurrections, wars, acts of terrorism, or by any strikes or lockouts or any
other causes beyond its control.
• A bank will not, upon resumption of its business, honor or negotiates under a
credit that expired during such interruption of its business.

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Article 37 Disclaimer for acts of an Instructed party

Article 38 Transferable Credits

• Transferable credit means a credit that specifically states it is 'transferable'.
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• A transferred credit cannot be further transferred at the request of the
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second beneficiary.
• Any request for transfer must indicate if and under what conditions
amendments may be advised to the second beneficiary.
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• The transferred credit may reduce the amount, unit price, expiry date,
period for presentation and the shipment date.
• If the first beneficiary is to present its own invoice, but fails do so or
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presented a discrepant invoice, the transferring bank has the right to

present the documents as received from the second beneficiary to the
issuing bank, without further responsibility to the first beneficiary.

Article 39 Assignment of Proceeds

• The fact that a credit is not stated to be transferable shall not affect the right
of the beneficiary to assign any proceeds to which it may be or may become
entitled under the credit, in accordance with the provisions of applicable law.
This article relates only to the assignment of proceeds and not to the
assignment of the right to perform under the credit.
 Export Credit

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Export trade is regulated by the Directorate General of Foreign Trade (DGFT) and its regional offices,
functioning under the Ministry of Commerce and Industry, Department of Commerce, Government of India.
Policies and procedures required to be followed for exports from India are announced by the DGFT, from
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Realisation and Repatriation of Proceeds of Export of Goods/ Software/ Services:

As per RBI guidelines it is obligatory on the part of the exporter to realize and repatriate the full value of
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goods/ software/ services to India within a stipulated period from the date of export, as under:

1- The period of realization and repatriation of export proceeds shall be 9 months from the date of
export for all exporters including Units in Special Economic Zones (SEZs), Status Holder Exporters,
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Export Oriented Units (EOUs), Units in Electronic Hardware Technology Parks (EHTPs), Software
Technology Parks (STPs) & Bio-Technology Parks (BTPs) until further notice.
2- For goods exported to a warehouse established outside India, the proceeds shall be realized within
fifteen months from the date of shipment of goods.
3- In view of the outbreak of pandemic COVID-19, it has been decided, in consultation
with the Government of India, to increase the period of realization and repatriation to
India of the amount representing the full export value of goods or software or services
exported, from nine months to fifteen months from the date of export, for the exports
made up to or on July 31,2020
4- OPGSP Limit in case of export shall be USD 10,000.

Third party payments for export/ import transactions:

Reserve Bank of India has decided to permit third party payments for export/ import transactions, which can
be made subject to conditions as under:

Firm irrevocable order backed by a tripartite agreement should be in place. However, it may not be insisted
upon in cases 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 subject to:

1- Branch should be satisfied with the bona-fides of the transaction and export documents, such as,
invoice/ FIRC.
 2- Branch should consider the FATF statements while handling such transaction.
3- Third party payment should be routed through the banking channel only.
4- The exporter should declare the third party remittance in the Export Declaration Form and it would
be responsibility of the Exporter to realize and repatriate the export proceeds from such third party
named in the EDF
5- Reporting of outstanding, if any, in the XOS would continue to be shown against the name of the
exporter. However, instead of the name of the overseas buyer from where the proceeds have to be
realized, the name of the declared third party should appear in the XOS.
6- In case of shipments being made to a country in Group II of Restricted Cover Countries, (e.g. Sudan,
Somalia, etc.), payments for the same may be received from an Open Cover Country
7- In case of imports, the Invoice should contain a narration that the related payment has to be made to
the (named) third party, the Bill of Entry should mention the name of the shipper as also the narration
that the related payment has to be made to the (named) third party and the importer should comply
with the related extant instructions relating to imports including those on advance payment being
made for import of goods.

Pre-shipment / Packing Credit

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Any loan or advance granted or any other credit provided by a bank to an exporter for financing the
purchase, processing, manufacturing or packing of goods prior to shipment / working capital expenses
towards rendering of services on the basis of letter of credit opened in his favour or in favour of some other
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person, by an overseas buyer or a confirmed and irrevocable order for the export of goods/ services.
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Period of Advance

 The period for which a packing credit advance may be given by a bank will depend upon the
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circumstances of the individual case, such as the time required for procuring, manufacturing or
processing (where necessary) and shipping the relative goods / rendering of services.


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If pre-shipment advances are not adjusted by submission of export documents within 360 days
from the date of advance, the advances will cease to qualify for prescribed rate of interest for
export credit to the exporter ab-initio.

Disbursement of Packing Credit

 Ordinarily, each packing credit sanctioned should be maintained as separate account for the
purpose of monitoring the period of sanction and end-use offunds.

 Banks may release the packing credit in one lump sum or in stages as per the requirement for
executing the orders /LC.

 Banks should continue to keep a close watch on the end-use of the funds and ensure that
credit at lower rates of interest is used for genuine requirements of exports.
 Banks should also monitor the progress made by the exporters in timely fulfillment of export
orders.
Liquidation of Packing Credit

The packing credit/ pre-shipment credit granted to an exporter may be liquidated out of proceeds of
bills drawn for the exported commodities on its purchase, discount etc., there by converting pre-
shipment credit into post-shipment credit.
 EDF/ SOFTEX Procedure

Export of goods through Customs ports

Designate branch should ensure the receipt of shipping documents issued by the Customs. In case the
documents are negotiated/ sent for collection then the concerned person should report the transaction
through Export Data Processing and Monitoring System (EDPMS) to the Reserve Bank after the documents
have been negotiated / sent for collection, and retain the documents at their end. Where duplicate copy of
EDF is misplaced or lost, branches may accept copy of duplicate EDF duly certified by Customs.
Export of goods/ software done through EDI ports

The manner of disposal of EC copy of Shipping Bill shall be the same as that for EDF. The duplicate copy of
the form together with a copy of invoice etc. shall be retained by AD branch and may not be submitted to the
Reserve Bank. The question of disposal of EC copy of shipping bill will, however, not arise where EC copy of
shipping bill is not printed in terms of CBEC’s Circular No.55/2016-Customs dated November 23, 2016 and
data of shipping bill is integrated with EDPMS.

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Export of goods through post

Postal Authorities shall allow export of goods by post only if the original copy of the EDF has been
countersigned by an AD. Therefore, EDF which involve sending goods by post should be first presented by
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the exporter to a designed branch for countersignature as per the procedure led down by RBI.
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1- AD Branch shall countersign EDF after ensuring that the parcel has been addressed to their branch
or correspondent bank in the country of import and return the original copy to the exporter, who shall
then submit the EDF to the post office with the parcel.
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2- The duplicate copy of EDF shall be retained by the AD Branch 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.
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3- The concerned overseas branch or correspondent shall be instructed to deliver the parcel to
consignee against payment or acceptance of relative bill.
4- AD Branch may, however, countersign EDF covering parcels addressed direct to the consignees,
provided:
 An irrevocable letter of credit for the full value of export has been opened in favor of the exporter
and has been advised through the AD Branch concerned. OR
 The full value of the shipment has been received in advance by the exporter through an AD
Branch. OR
 The AD Branch is satisfied, on the basis of the standing and track record of the exporter and the
arrangements made for realization of the export proceeds. In such cases, particulars of advance
payment/letter of credit/AD Branch’s certification of standing, etc., of the exporter should be
furnished on the form under proper authentication.
5- Any alteration in the name and address of consignee on the EDF form should also be authenticated
by AD Branch under its stamp and signature.

SOFTEX Forms

All software exporters can now file single as well as bulk SOFTEX form in the form of a statement in excel
format to the competent authority for certification. Since the SOFTEX data from STPI/ SEZ are being
transmitted in electronic format to RBI, the exporters now have to submit the SOFTEX form in duplicate as
per the revised procedure. A common “SOFTEX Form” has been devised to declare single as well as bulk
software exports.
 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.

Export of Services
It is clarified that, in respect of export of services to which none of the Forms specified in these Regulations
apply, the exporter may export such services 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 in accordance with the provisions of the Act, and these Regulations, as also other rules
and regulations made under the Act.

Third party export proceeds

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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.

Short Shipments and Shut out Shipments

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1- When part of a shipment covered by an EDF already filed with Customs is short-shipped, the
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exporter must give notice of short-shipment to the Customs in the form and manner prescribed. In
case of delay in obtaining certified short-shipment notice from the Customs, the exporter should give
an undertaking to the designated Branch to the effect that he has filed the short- shipment notice
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with the Customs and that he will furnish it as soon as it is obtained.

2- Where a shipment has been entirely shut out and there is delay in making arrangements to re-ship,
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the exporter will give notice in duplicate to the Customs in the form and manner prescribed, 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 Reserve
Bank 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

Obligations of Authorised Dealers

Grant of EDF waiver

Branches may consider requests for grant of EDF waiver from exporters as under:
1- Status holders shall be 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 an annual
limit of Rupees One Crore or 2% of average annual export realization during preceding three
licensing years, whichever is lower.
2- For export of Pharma products by pharmaceutical companies, the annual limit would be 2% of
average annual export realisation during preceding three licensing years.
3- In case of supplies of pharmaceutical products, vaccines and lifesaving drugs to health programmes
of international agencies such as UN,WHO-PAHO and Government health programmes, the annual
limit shall be up to 8% of the average annual export realisation during preceding three licensing
 years. Such free of cost supplies shall not be entitled to Duty Drawback or any other export incentive
under any export promotion scheme.
4- The record of EDF form waived shall be maintained by the Branch shall be maintained and kept
ready for audit/ Inspection.
5- Exports of goods not involving any foreign exchange transaction directly or indirectly requires the
waiver of EDF procedure from the Reserve Bank.

Receipt of advance against exports:

1. Where an exporter receives advance payment (with or without interest), from a buyer outside India, the
exporter shall be under an obligation to ensure that the shipment of goods is made within one year from the
date of receipt of advance payment; the rate of interest, if any, payable on the advance payment shall not
exceed 100 basis points above the London Inter-Bank Offered Rate (LIBOR) or other applicable benchmark.
as may be directed by the Reserve Bank, as the case may be; and the documents covering the shipment are
routed through the AD branch through whom the advance payment is received.

Provided that in the event of the exporter’s inability to make the shipment, partly or fully, within one year from

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the date of receipt of advance payment, no remittance towards refund of unutilized portion of advance
payment or towards payment of interest, shall be made after the expiry of the said period of one year, without
the prior approval of the Reserve Bank.
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(1) EDPMS will capture the details of advance remittances received for exports in EDPMS.
Henceforth, Branches through TFC Delhi should report all the inward remittances including
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advance as well as old outstanding inward remittances received for export of goods/ software
to EDPMS. Further, Branches through TFC Delhi should need to report the electronic FIRC to
EDPMS wherever such FIRCs are issued against inward remittances.
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(2) AD Branches can also allow exporters having a minimum of three years’ 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 conditions
stipulated by RBI as under:

(a) Firm irrevocable supply orders and contracts should be in place. The contract with the
overseas party/ buyer should be vetted and the same shall clearly specify the nature,
amount and delivery timelines of the products over the years and penalty in case of non-
performance or contract cancellation. Product pricing should be in consonance with
prevailing international prices.
(b) Company should have capacity, systems and processes in place to ensure that the
orders over the duration of the said tenure can actually be executed.
(c) The facility is to be provided only to those entities, which have not come under the
adverse notice of Enforcement Directorate or any such regulatory agency or have not
been caution listed.
(d) Such advances should be adjusted through future exports.
(e) The rate of interest payable, if any, should not exceed LIBOR plus 200 basis points.
(f) The documents should be routed through one Authorized Dealer branch only.
(g) Authorized Dealer Branch should ensure compliance with AML / KYC guidelines.
(h) Such export advances shall not be permitted to be used to liquidate Rupee loans
classified as NPA.
(i) Double financing for working capital for execution of export orders should
be avoided.
 (j) Receipt of such advance of USD 100 million or more should be
immediately reported to the Trade Division, Foreign Exchange
Department, Reserve Bank of India, Central Office, Mumbai.

(3) In In case AD branch is required to issue bank guarantee (BG) / Stand by

Letter of Credit (SBLC) for export performance, then the issuance should be
rigorously evaluated as any other credit proposal by respective sanctioning
authority keeping in view, among others, prudential requirements. Exporter
must have Bank guarantee limit established by the respective
sanctioning authority for this purpose as per extant guidelines of RBI /
Bank. (As amended from time to time).

(a) BG/SBLC may be issued for a term not exceeding two years at a time
and further rollover of not more than two years at a time may be allowed

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subject to satisfaction with relative export performance as per the
contract.
(b) BG/SBLC should cover only the advance on reducing balance basis.
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(c) BG/SBLC issued from India in favor of overseas buyer should not be
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discounted by the overseas branch / subsidiary of bank in India.
(d) AD Branch to be guided by the Master Circular on Guarantees and Co-
acceptances issued by Department of Banking Regulation for compliance
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of other guidelines.

(4) AD Branch may allow the purchase of foreign exchange from the market for
07 51

refunding advance payment credited to EEFC account only after utilizing the
entire balances held in the exporter’s EEFC accounts maintained at different
branches.
(5) AD Branches in consultation with Trade Finance Centre (TFC) 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 ‘export
agreement’ provides for shipment of goods extending beyond the period of
one year from the date of receipt of advance payment subject to conditions
stipulated by RBI as under:

(i) The KYC and due diligence exercise has been done by the AD Branch
for the overseas buyer;
(ii) Compliance with the Anti-Money Laundering standards has been
ensured;
(iii) The AD Branch should ensure that export advance received by the
exporter should be utilized to execute export and not for any other
purpose i.e., the transaction is a bonafide transaction;
(iv) Progress payment, if any, should be received directly from the overseas
buyer strictly in terms of the contract;
 (v) The rate of interest, if any, payable on the advance payment shall not
exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points;
(vi) There should be no instance of refund exceeding 10% of the advance
payment received in the last three years;
(vii) The documents covering the shipment should be routed through the
same AD branch; and
(viii) In the event of the exporter's inability to make the shipment, partly or
fully, no remittance towards refund of unutilized portion of advance
payment or towards payment of interest should be made without the prior
approval of the Reserve Bank.

(6) As it has been observed that there is substantial increase in the number and
amount of advances received for exports remaining outstanding beyond the
stipulated period on account of non-performance of such exports (shipments

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in case of export of goods), AD branches are advised to efficiently follow up
with the concerned exporters in order to ensure that export performance
(shipments in case of export of goods) are completed within the stipulated time
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08
period.
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(7) Branches should exercise proper due diligence and ensure compliance with
KYC and AML guidelines so that only bonafide export advances flow into
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India. Doubtful cases as also instances of chronic defaulters may be referred

to Directorate of Enforcement (DoE) for further investigation. TFC New Delhi
must send a quarterly statement indicating details of such cases to the
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concerned Regional Offices of RBI within 21 days from the end of each quarter
through the mentioned channel.

Delay in submission of shipping documents by exporters

In cases where exporters present documents pertaining to exports after the prescribed period of 21 days
from date of export, branches may handle them without prior approval of the Reserve Bank, provided they
are satisfied with the reasons for the delay.

Return of documents to exporters

The duplicate copies of EDF and shipping documents, once submitted to the branch for negotiation,
collection, etc., should not ordinarily be returned to exporters, except for rectification of errors and re-
submission.

Direct dispatch of documents by the exporter

(A) AD branches should normally dispatch shipping documents to their overseas

branches / correspondents expeditiously. However, AD Branches may dispatch
shipping documents direct to the consignees or their agent’s resident in the country
of final destination of goods in cases where:
 (i) Advance payment or an irrevocable letter of credit has been received for the
full value of the export shipment and the underlying sale contract/letter of
credit provides for dispatch of documents direct to the consignee or his agent
resident in the country of final destination of goods.
(ii) AD branch may also accede to the request of the exporter provided the
exporter is a regular customer and the AD branch is satisfied, on the basis of
standing and track record of the exporter and arrangements have been made
for realization of export proceeds.
(iii) AD Branches may also permit 'Status Holder Exporters’ (as defined in the
Foreign Trade Policy), and units in Special Economic Zones (SEZ) to dispatch
the export documents to the consignees outside India subject to the terms and
conditions stipulated by RBI as under:

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a. The export proceeds are repatriated through the AD banks named in the
EDF.
b. The duplicate copy of the EDF is submitted to the AD banks for monitoring
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purposes, by the exporters within 21 days from the date of shipment of
export.
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(iv) AD Branch may regularize cases of dispatch of shipping documents by the
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exporter direct to the consignee or his agent resident in the country of the final
destination of goods, irrespective of the value of export shipment, subject to
the following conditions:
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a. The export proceeds have been realized in full except for the amount
written off, if any, in accordance with the extant provisions for write off.
b. The exporter is a regular customer of AD Branch for a period of at least
six months.
c. The exporter’s account with the AD Branch is fully compliant with the
Reserve Bank’s extant KYC / AML guidelines.
d. The AD branch is satisfied about the bonafides of the transaction.

In case of doubt, the AD branch may consider filing Suspicious Transaction Report (STR) with
FIU_IND (Financial Intelligence Unit in India).

(B) Direct Dispatch may be permitted by field functionaries as under:

1. Where Bank has no Credit exposure on the customer: Branch Head of

AD branch, may accede to the request of the customer and send the
shipping documents directly to consignees / agents situated at the final
destination of goods subject to the following:
 a) The exporter is a regular customer of the bank and have satisfactory track
record of export realizations.
b) An undertaking from the customer confirming that he understands the risk
associated with direct dispatch of shipping documents.
c) The satisfactory arrangements will be made by the exporter for realization
of export proceeds. The export proceeds must be repatriated through AD
Branch.
d) Advance payment has been received for the full value of the export
shipment or an irrevocable letter of credit has been received for the full
value of the export shipment and the underlying sale contract/ letter of
credit provides for dispatch of documents direct to the consignee or his
agent resident in the country of final destination of goods.
e) The duplicate export declaration form is submitted to the Branch within 21
days from the date of shipment.

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2. Where Bank has Credit exposure on the customer: In view of the credit
risks associated with direct dispatch of shipping documents to consignees/
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agents situated at the final destination of goods, the facility should be

08
permitted after proper assessment of the credit risk the bank may be
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exposed.

The facility of direct dispatch of shipping documents to consignees/ agents

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situated at the final destination of goods, where bank has given finance to
the exporter against that shipping document, should only be permitted by
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ZOCAC and above.

The facility will be permitted by respective sanctioning authority subject to the

following conditions:

(i) Where documents are covered under Export Letter Of Credit:

a) If transaction is under Export LC of approved Bank and condition of direct

dispatch of documents is incorporated in the LC.
The shipping documents will be sent by the branch to the consignees/
agents situated at the final destination of goods after lodging the same
in bills menu in FINACLE through designated TFCs.
b) The export proceeds will be repatriated through us.
c) AD Branch has to ensure that Export LC is issued by the Foreign Bank
appearing in the List of Correspondent / Approved Bank and in case of
LC is issued by Unapproved Bank, Specific Approval has been taken
from HO: IBD as per Bank’s prescribed guidelines.
d) The duplicate copy of the Export Declaration Forms (EDF) along with
shipping document, invoice and other documents are to be submitted by
 the exporter to the branch within prescribed days mentioned in the
Export LC.
e) The overseas buyer is not on the adverse list of ECGC.
f) Exporter is not on the Caution list/ defaulter list of RBI/ECGC.

Where documents are not covered by Export LC:

(a) Where documents are not under Export LC, direct dispatch of documents
is allowed only up to USD 1 million or its equivalent, per export shipment.
(b) The underlying contract between exporter and importer specifically
mentions about direct dispatch / electronic transmission of shipping
documents to buyer.
(c) The duplicate copy of the EDF along with shipping document, invoice
and other documents are submitted to the branch within 21 of shipment

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for purchase / discount of documents.
(d) The shipping documents will be sent by the branch to the consignees /
agents situated at the final destination of goods after lodging the same
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in bills menu in FINACLE.

08
(e) The export proceeds will be repatriated through AD branch.
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(f) AD Branch will arrange credit worthiness report on overseas buyer from
Bank’s approved credit information agencies and this report should not
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have any adverse comments / clause.

(g) Sanctioning authority may be guided by IBD Foreign Exchange
Circular No. 85/2021 dated 10.12.2021 (Consolidated Circular on
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ECGC Cover for Export Credit – Post Shipment), as amended from

time to time, regarding obtention / waiver of specific buyer wise
policy from ECGC with respect to overseas buyer.
(h) Exporter will ensure and enter into an agreement / arrangement with
overseas buyer to ensure that the payment is made to AD Branch only
and copy of such agreement / arrangement will be submitted to the AD
branch.
(i) The overseas buyer is not on the adverse list of ECGC.
(j) Exporter is not on the Caution list / defaulter list of RBI/ECGC.

Respective TFCs shall ensure compliance of direct dispatch of export

documents as per guidelines mentioned above while handling the work item in
Finacle. AD branch while sending work item to TFCs shall clearly make a
mention about direct dispatch of shipping documents and will also provide
confirmation in respect compliance of terms and conditions to respective
TFCs. Respective TFCs shall maintain record of Direct Dispatch for inspection
and audit purpose.
 Part Drawings /Undrawn Balances:

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., to be ascertained after arrival and inspection, weighment
or analysis of the goods. In such cases, AD branches may negotiate the bills,
provided:

a) The amount of undrawn balance is considered normal in the particular line of

export trade, subject to a maximum of 10 per cent of the full export value.
b) An undertaking is obtained from the exporter on the duplicate of EDF forms
that he will surrender/account for the balance proceeds of the shipment within
the period prescribed for realization.
c) In cases where the exporter has not been able to arrange for repatriation of

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the undrawn balance in spite of best efforts, AD branches, on being satisfied
with the bona fides of the case, should ensure that the exporter has realized
at least the value for which the bill was initially drawn (excluding undrawn
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balances) or 90 per cent of the value declared on EDF form, whichever is

08
more and a period of one year has elapsed from the date of shipment.
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Consignment Exports:
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(i) When goods have been exported on consignment basis, AD branches,

while forwarding shipping documents to his overseas
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branch/correspondent, should instruct the latter to deliver them only against

trust receipt/undertaking to deliver sale proceeds by a specified date within
the period prescribed for realization of proceeds of the export. This
procedure should be followed even if, according to the practice in certain
trades, a bill for part of the estimated value is drawn in advance against the
exports.
(ii) 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. The account sales received from the
Agent/Consignee should be verified by the AD branch. 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.
(iii) In case the goods are exported on consignment basis, freight and marine
insurance must be arranged in India.
(iv) AD Branch 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.
 Export Bills Register

Branches will maintain Export Bills Register, in physical or electronic form aligned with Export Data
Processing and Monitoring System (EDPMS). The bill number should be given to all type of export
transactions on a financial year basis (i.e. April to March).

Follow-up of overdue bills

AD Branches should closely watch realization of bills and in cases where bills remain outstanding, beyond
the due date the matter should be promptly taken up with the concerned exporter for payment from overdue
bills. If the exporter fails to arrange for delivery of the proceeds within the stipulated period or seek extension
of time beyond the stipulated period, the matter should be reported to the Regional Office concerned of the
Reserve Bank stating, where possible, the reason for the delay in realizing the proceeds.

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Branches should follow up export outstanding with exporters systematically and vigorously so that action
against defaulting exporters does not get delayed. Proper record of the follow-up is to be maintained by AD
branches.
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With operationalisation of EDPMS on March 01, 2014, realization of all export transaction for shipping

08
documents after February 28, 2014 should be reported in EDPMS.
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Extension of time
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The RBI has permitted the ADs to extend the period of realization of export proceeds beyond stipulated
period of realization from the date of export, up to a period of six months, at a time, irrespective of the invoice
value of the export subject to the following conditions:
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1- The export transactions covered by the invoices are not under investigation by Directorate of
Enforcement / Central Bureau of Investigation or other investigating agencies
2- The AD Branch is satisfied that the exporter has not been able to realize export proceeds for
reasons beyond his control.
3- The exporter submits a declaration that the export proceeds will be realized during the extended
period.
4- While considering extension beyond one year from the date of export, the total outstanding of the
exporter does not exceed USD one million or 10 % of the average export realizations during the
preceding three financial years, whichever is higher.
5- In cases where the exporter has filed suits abroad against the buyer, extension may be granted
irrespective of the amount involved / outstanding.
6- Cases which are not covered by the above instructions would require prior approval from the
concerned Regional Office of the Reserve Bank.
7- Reporting should be done in EDPMS.

Write-off of unrealized export bills

An exporter who has not been able to realize the outstanding export dues despite best efforts may either
self-write off or approach the Branch, who had handled the relevant shipping documents, with appropriate
supporting documentary evidence. The limits prescribed for write-offs of unrealized export bills are as under:
Self “write-off” by an exporter (Other than Status Holder Exporter) 5%*
Self “write-off” by Status Holder Exporters 10%*
Write-off” by Authorized Dealer Branch 10%*
*of the total export proceeds realized during the previous calendar year.

1- The above limits will be related to total export proceeds realized during the previous calendar year
and will be cumulatively available in a year.
2- The above write-off will be subject to conditions that the relevant amount has remained outstanding
for more than one year, satisfactory documentary evidence is furnished in support of the exporter
having made all efforts to realize the dues, and the case falls under any of the undernoted
categories:
 The overseas buyer has been declared insolvent and a certificate from the official liquidator
indicating that there is no possibility of recovery of export proceeds has been produced.
 The overseas buyer is not traceable over a reasonably long period of time.
 The goods exported have been auctioned or destroyed by the Port /Customs / Health authorities
in the importing country.

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 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.
 The unrealized amount represents the undrawn balance of an export bill (not exceeding 10% of
the invoice value) remaining outstanding and turned out to be unrealizable despite all efforts made
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by the exporter.
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 The cost of resorting to legal action would be disproportionate to the unrealized amount of the
export bill or where the exporter even after winning the Court case against the overseas buyer
could not execute the Court decree due to reasons beyond his control.
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 Bills were drawn for the difference between the letter of credit value and actual export value or
between the provisional and the actual freight charges but the amounts have remained unrealized
consequent on dishonor of the bills by the overseas buyer and there are no prospects of
07 51

realization.
3- The exporter has surrendered proportionate export incentives if any, availed of in respect of the
relative shipments. The AD Branch should obtain documents evidencing surrender of export
incentives availed of before permitting the relevant bills to be written off.
4- In case of self-write-off, the exporter should submit to the concerned AD Branch, a Chartered
Accountant’s certificate, indicating the export realization in the preceding calendar year and also the
amount of write-off already availed of during the year if any, the relevant EDF to be written off, Bill
No., invoice value, commodity exported, country of export. The CA certificate may also indicate that
the export benefits, if any, availed of by the exporter have been surrendered.

However, the following would not qualify for the write off facility:

1- Exports made to countries with externalization problem i.e. where the overseas buyer has deposited
the value of export in local currency but the amount has not been allowed to be repatriated by the
central banking authorities of the country.
2- EDF which are under investigation by agencies like, Enforcement Directorate, Directorate of
Revenue Intelligence, Central Bureau of Investigation, etc. as also the outstanding bills which are
subject matter of civil / criminal suit.

Processing of export related receipts through Online Payment Gateway Service

Providers (OPGSPs)
Authorised Dealer Category – I (AD Category–I) banks have been allowed to offer the facility of repatriation
of export related remittances by entering into standing arrangements with Online Payment Gateway Service
Providers (OPGSPs) subject to the following conditions:
1- The AD Category-I banks offering this facility shall carry out the due diligence of the OPGSP.
2- This facility shall only be available for export of goods and services of value not exceeding USD
10,000 (US Dollar ten thousand).
3- AD Category-I banks providing such facilities shall open a NOSTRO collection account for receipt of
the export related payments facilitated through such arrangements. Where the exporters availing of
this facility are required to open notional accounts with the OPGSP, it shall be ensured that no funds
are allowed to be retained in such accounts and all receipts should be automatically swept and
pooled into the NOSTRO collection account opened by the AD Category-I bank.

Diamond Dollar Account (DDA)

1- Under the scheme of Government of India, firms and companies dealing in purchase/ sale of rough

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or cut and polished diamonds/ precious metal jewellery plain, minakari and/ or studded with/ without
diamond and/or other stones, with a track record of at least 2 years in import/ export of diamonds/
coloured gemstones/ diamond and coloured gemstones studded jewellery/plain gold jewellery and
22 1
having an average annual turnover of Rs. 3 crore or above during the preceding three licensing

08
years (licensing year is from April to March) are permitted to transact their business through
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Diamond Dollar Accounts.

2- They may be allowed to open not more than 5 Diamond Dollar Accounts with their banks.
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3- Eligible firms and companies may apply for permission to their designated branches in the format
prescribed.
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4- Conditions applicable to EEFC accounts shall also apply.

5- GM-IBD is empowered to approve opening of Diamond Dollar Account.

6- Zonal Office will be monitoring authority for DDA accounts. All AD Branch maintaining
DDA account should assess the track record of the firm / company at the end of every
licensing year (April-March) and will provide thedetails to respective Zonal Office.

Exchange Earners` Foreign Currency Account (EEFC Account)

1- A person resident in India may open with, our designated branches, an account in foreign currency
called the Exchange Earners’ Foreign Currency (EEFC) Account, in terms of Regulation 4 (D) of
Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India)
Regulations, 2015 dated January 21, 2016.
2- Resident individuals are permitted to include resident close relative(s) as defined in the Companies
Act 2013 as a joint holder(s) in their EEFC bank accounts on former or survivor basis.
3- This account shall be maintained only in the form of non-interest bearing current account. No credit
facilities, either fund-based or non-fund based, shall be permitted against the security of balances
held in EEFC accounts by the branch.
 4- All categories of foreign exchange earners are allowed to credit 100% of their foreign exchange
earnings to their EEFC Accounts subject to the condition that:
 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.
 The facility of EEFC scheme is intended to enable exchange earners to save on
conversion/transaction costs while undertaking forex transactions. This facility is not intended to
enable exchange earners to maintain assets in foreign currency, as India is still not fully
convertible on Capital Account.

Deemed Exports

RBI has not stipulated any guidelines on deemed export in its Master Direction on Export of goods and
services. The detailed guidelines defined in Foreign Trade Policy 2015-20 under chapter 7 which provides a
level-playing field to domestic manufacturers in certain specified cases, as may be decided by the

:23
Government from time to time.

Guidelines with regard to deemed export to be complied with are as under:

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a) Supplies shall be made directly to entities listed in EXIM Policy.
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b) Third party supply shall not be eligible for benefits/ exemptions.
c) Bank guarantee related to deemed exports will attract commission as per Service Charges circular issued
by HO: IBD from time to time.
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d) Export Realisation Certificate in respect of deemed exports should be issued by AD branches. To enable
the AD branches to issue the certificate; photo copies of order/ contract, and documentary proof supplied by
concerned authority regarding payment etc. are to be forwarded to them by Non-AD branches.
07 51

e) Banks are permitted to extend rupee pre-shipment and post supply rupee export credit at concessional
rate of interest to parties against orders for supplies in respect of projects aided/ financed by bilateral or
multilateral agencies/funds (including World Bank, IBRD, IDA) as notified from time to time by Department of
Economic Affairs, Ministry of Finance under the Chapter “Deemed Exports” in Foreign Trade Policy, which
are eligible for grant of normal export benefits by Government of India.

f) Advances provided should be adjusted from free foreign exchange representing payments for the supplies
of goods to these agencies. However, Chief Managers & above may permit liquidation of packing credit out
of balances lying in Exchange Earners Foreign Currency A/c (EEFC A/C) and/ or rupee resources of the
exporter, to the extent exports have actually taken place in terms of guidelines issued by Integrated Risk
Management Division (L&A) from time to time.

h) Banks may also extend rupee

 Pre-shipment credit, and
 Post-supply credit (for a maximum period of 30 days or upto the actual date of payment by the
receiver of goods, whichever is earlier); for supply of goods specified as ‘Deemed Exports’ under
the referred Chapter of Foreign Trade Policy from time to time.

i) The post-supply advances would be treated as overdue after the period of 30 days. In cases, where such
overdue credits are liquidated within a period of 180 days from the notional due date (i.e. before 210 days
from the date of advance), the branches are required to charge interest prescribed for the category ‘ECNOS’
for such an extended period, at post-shipment stage.
j) If the bills are not paid within the aforesaid period of 210 days, branches will charge Interest at the rate
prescribed for Export Credit Not specified (‘ECNOS’) at Post-shipment stage from the date of advance.

Consignment Exports
1- When goods have been exported on consignment basis, the branches, 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 period
prescribed for realization of proceeds of the export. This procedure should be followed even if,
according to the practice in certain trades, a bill for part of the estimated value is drawn in advance
against the exports.
2- 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.
3- The account sales received from the Agent/ Consignee should be verified by the branch. Deductions

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in Account Sales should be supported by bills/receipts in original except in case of petty items like
postage/cable charges, stamp duty, etc.
4- In case the goods are exported on consignment basis, freight and marine insurance must be
arranged in India.
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5- AD Branch may allow the exporters to abandon the books, which remain unsold at the expiry of the

08
period of the sale contract. Accordingly, the exporters may show the value of the unsold books as
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deduction from the export proceeds in the Account Sales.

Exporters' Caution List

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1- Caution Listing/ de-caution Listing of exporters is automated in EDPMS. The updated list of caution
listed exporters can be accessed through EDPMS on a daily basis. Criteria laid down for cautioning/
07 51

de-cautioning of exporters in EDPMS is detailed in master direction of RBI as under:

 The exporters would be caution listed if any shipping bill against them remains open for more than
two years in EDPMS provided no extension is granted by AD Branch/RBI. Date of shipment will be
considered for reckoning the realisation period.
 Once related bills are realised and closed or extension for realization is granted, the exporter will
automatically be de-cautioned listed.
 The exporters can also be caution listed even before the expiry of two years period based on
the recommendation of AD Branch. The recommendation may be based on cases where exporter
has come to adverse notice of the Enforcement Directorate (ED)/ Central Bureau of Investigation
(CBI)/ Directorate of Revenue Intelligence (DRI)/ any such other law enforcement agency or the
case where exporter is not traceable or not making any serious efforts for realisation of export
proceeds. In such cases, AD may forward its findings to the concerned regional office of RBI
recommending inclusion of the name of the exporter in the caution list.
 Reserve Bank will caution/de-caution the exporters in such cases based on the recommendation
of AD Branch.

AD Branch should follow the procedure mentioned below while handling shipping documents in respect of
caution listed exporters:

1- They will intimate the exporters about their caution listing, giving the details of outstanding shipping
bills. When caution listed exporters submit shipping documents for negotiation/ purchase/ discount/
collection, etc. the AD Branch may accept the documents subject to following conditions
  The exporters concerned should produce evidence of having received advance payment or an
irrevocable letter of credit in their favour covering the full value of the proposed exports.
 In case of usance bills, the relative letter of credit should cover full export value and also permit
such drawings. Besides, the usance bills should also mature within prescribed realization period
reckoned from date of shipment.
 Except under the above mentioned points , AD Branch should not handle the shipping documents
of caution listed exporters.

AD Branch (including LCB/eLCBs) should obtain prior approval of Reserve Bank

for issuing guarantees for caution-listed exporters duly approved by respective
ZOCAC-I & above.

Issue of Guarantees by an Authorised Dealer

(1) AD branches may give guarantee in respect of any debt, obligation or other

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liability incurred by a person resident in India and owned to a person resident
outside India, where the debt, obligation or other liability is incurred by the
person resident in India as an exporter, on account of exports from India.
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(2) AD Branch may give a guarantee in respect of any debt, obligation or other
liability incurred by a person resident outside India, in the following cases,
namely:
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(i) where such debt, obligation or liability is owned to a person resident in India
in connection with a bonafide trade transaction: Provided that the
07 51

guarantee given under this clause is covered by a counter-guarantee of a

bank of international repute resident broad;
(ii) As a counter-guarantee to cover guarantee issued by his branch or
correspondent outside India, on behalf of Indian exporter in cases where
guarantees of only resident banks are acceptable to overseas buyers.

Issuance of Electronic Bank Realisation Certificate (eBRC):

AD Branches/TFC Delhi are required to update the EDPMS with data of export proceeds
on “as and when realised basis” and, with effect from October 16, 2017, they are required
to generate Electronic Bank Realisation Certificate (eBRC) only from the data available in
EDPMS, to ensure consistency of data in EDPMS and consolidated eBRC.
 Usance Bill Payable at Sight (UPAS)
IBD : Foreign Exchange : 31/2022

A large number of exports to Bangladesh & Myanmar are taking place from India under Letter of
Credit. The banks located in Myanmar & Bangladesh are generally unrated from the accredited
external rating agencies i.e. Fitch, Moody’s, S&P. The banks located in Bangladesh & Myanmar
issues LC in favour of seller (Exporter) for importing goods from India. Generally banks in India are
reluctant to discount LCs and taking exposure against these banks. Thus, discounting of bills under
Usance Bill Payable at Sight (UPAS) against LC is widely used.

Usance Bill Payable at Sight refers to discounting of bills against L/C, which contains clauses that it
is a Usance acceptance L/C and it is a forward draft which requires the letter of credit-issuing bank
to be the payer, and stipulate that the letter of credit-issuing bank pays the seller (exporter) on

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demand or before due date after acceptance, and that such expenses as the draft acceptance
charge, discounting interest and service charge are paid by the buyer (importer). This business will
fetch income on account of commission towards acceptance charges, discounting charges and
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service charges. As such, we may adopt the policy putting some risk mitigation plan. The Policy
will cover Banks Located in Bangladesh & Myanmar only. However, if desired, the scope of UPAS
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will be extended to Banks located in other countries with the approval of GM-IBD.
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Acceptance of Forwarder Cargo Receipt

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IBD FOREIGN EXCHANGE CIRCULAR 25/2022

Forwarder’s Cargo Receipt (FCR): It is a document issued by a freight forwarder or freight consolidator
indicating receipt of goods from the seller and held on behalf of the buyer. Goods are generally received in
the seller’s country and the forwarder/consolidator will arrange shipment to the buyer according to the
buyer’s instructions. FCR as the name suggests is a transactional document, issued by a freight forwarder to
confirm receipt of cargo. It is not a transportation document. Typically, a freight forwarder acts as an agent of
buyer for cargo. In the process of that transaction, the freight forwarder arranges the booking of space with
an actual carrier on behalf of the buyer.

AD Category–I banks may accept Forwarder’s Cargo Receipts (FCR) issued by IATA approved agents, in
lieu of bills of lading, for negotiation/collection of shipping documents, 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 even if the relative sale contract with the overseas buyer does not provide for
acceptance of FCR as a shipping document, in lieu of bill of lading.

Authorized Dealers may, at their discretion, also accept FCR issued by Shipping companies of repute/IATA
approved agents (in lieu of bill of lading), for purchase/discount/collection of shipping documents even in
cases, where export transactions are not backed by letters of credit, provided their 'relative sale contract' with
overseas buyer provides for acceptance of FCR as a shipping document in lieu of bill of lading.
Delegated Powers For Accepting FCR As Shipping Documents-

Acceptance of FCR in lieu of Bill of Lading in cases where bank has given finance to the exporter against
that bill - ZOCAC-I and above may permit the acceptance of FCR. In case of Borrowal account of
CBB/LCB/eLCB, if the acceptance of FCR is not part of the sanction, In charge CBB/LCB/eLCB may permit
the acceptance of FCR. However, CBB/LCB/eLCB to ensure that at the time of renewal / review of the limits
the same is incorporated in the sanctions. In case CBB is headed by Chief Manager, approval shall be taken
from ZOCAC – I.

INTEREST RATES
INTEREST RATE ON BILL DISCOUNTED/ PURCHASED UNDER LETTER OF CREDIT
Interest Rate Structure for export credit is given in L&A Circulars on interest rates on

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advances issued from Head Office time to time.

INTEREST EQUALISATION SCHEME – FEX Circular No. 17/2022

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Interest Equalisation scheme has been extended up to 31.03.2024. DGFT has
operationalized new online module for filing of electronic registration for interest
equalisation scheme w.e.f. 01.04.2022. Exporters need to apply online by navigating to the
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DGFT website ([Link] A Unique IES Identification Number (UIN) gets

generated automatically which is to be submitted to the branch when availing Interest
Equalisation benefit against their pre and post shipment rupee export credit applications.
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The UIN generated shall have a validity of 1 year from the date of registration.

Export Gold Card / Normal Transit Period (NTP)

PNB EXPO GOLD CARD SCHEME- FEX CIRCULAR No. 32/2020
RBI vide their master Circular No. RBI/2015-16/47 DBR [Link].14/04.02.002/2015-16 dated 01.07.2015
on Rupee/Foreign Currency Export Credit and Customer Service to Exporters issued guidelines relating to
Gold Card Scheme for exporter.

Government (Ministry of Commerce and Industry), in consultation with RBI had indicated in the Foreign
Trade Policy 2003-04 that a Gold Card Scheme would be worked out by RBI for creditworthy exporters with
good track record for easy availability of export credit
on best terms. Accordingly, in consultation with select banks and exporters, a Gold Card Scheme was drawn
up. The Scheme envisages certain additional benefits based on the record of performance of the exporters.
The Gold Card holder would enjoy simpler and more efficient credit delivery mechanism in recognition of his
good track record.

ELIGIBILITY
1-Exporters with minimum rating of ‘B1’ as per internal risk rating module of Amalgamated entity will be
eligible under this scheme.
(2) Exporters, whose accounts have been classified as ‘Standard’ continuously for a period of three years
and there is no irregularities /adverse features in the conduct of the account, will be considered for the
scheme.
(3) Gold Card can also be granted to exporters undertaking exports on collection basis, provided they have
been in export business at least for 3 years including their dealings with previous bankers.
Gold Card to Take over Exporter customers:
Gold Card can be issued to exporters whose accounts have been taken over by Amalgamated entity with
satisfactory track record of such exporters whose accounts are under Standard category with the previous
Bank as per the specific indication available from the Confidential Report on the conduct of the account
obtained from their previous Bank. However, Gold Card to such exporters can be granted only with the
approval of Circle Head /DGM of LCBs.

Exporters not eligible under the scheme:

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Exporter customers blacklisted by Enforcement Directorate or DRI or CBI or any government agency or
ECGC in their Specific Approval list or listed in RBI’s Defaulter’s/caution list of exporters etc., are not eligible
under the scheme. Also those exporters making losses for the past 3 years or having overdue export bills in
excess of 10 per cent of the previous year’s export turnover are not eligible under the scheme.
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Assessment of credit Limits for Exporter customers:

1- The credit needs of the exporters may be accessed through various methods viz. Projected Balance
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Sheet Method, Turnover Method or Cash Budget Method etc., which is most suitable and
appropriate to the business of exporter and keeping in view of the request of exporter besides
following RBI/Bank’s existing guidelines.
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2- The limits upto Rs.2 Crore are assessed based on simplified turnover method and in case of MSME
borrowers limits upto Rs.5 Crore are assessed based on the said method in terms of RBI guidelines.
However, limits beyond the above ceiling are assessed as per MPBF system.
3- It has been decided that sanction and renewal of limits under Gold Card Credit Scheme upto Rs. 5
Crore may be considered based on simplified turnover method.
4- In-principle limits will be sanctioned for a period of three years with a provision for automatic renewal
under this scheme subject to fulfilment of the terms and conditions of sanction.
5- Priority will be given to the PCFC requirements of the Gold Card holders of exporter borrowers.
6- The Credit proposals for export credit have to be processed expeditiously and sanctioned within a
fixed time frame. The time lines for disposal of applications received for sanction of export credit
under the Gold card scheme and other exporter customers are given below:-

Time Frame
Gold Card Holders Other Exporters

For disposal of fresh 25 days 45 days

applications
Renewal/ Review of 15 days 30 days
limits
Sanction of ad hoc limits 7 days 15 days
 20% of Adhoc limit to Gold Card Exporter customers:
Sanctioning authority may sanction standby limit of 20% of the assessed limit at the time of initial sanction
itself, which may be utilized by the exporters in case of need for execution of additional export orders. Such
sanctions shall be valid within the validity of original sanction. However, the total limits, including standby
limits shall be considered by the sanctioning authority as per vested loaning powers only.

In terms of IRMD Circulars L & A Circular no. 61 dated 07.04.2021 (as amended from time to time),
officers in Scale III to Scale V may exercise loaning powers up to 125% of their normal powers provided the
additional 25% powers are utilized only for export limits.
(Rs. in Cr.)
Scale III & IV MCC-IV/PLP- IV MCC-V/ ZOCAC-I ZOCAC-II
PLP-V
0.125 5.00 12.50 37.50 62.50
(0.10) (4.00) (10.00) (30.00) (50.00)

Figure in ( ) are existing ceilings for other borrowers. In case of above Rs. 50 crore, HOCAC-I and

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above will exercises 125% powers of their normal vested powers for Gold Card Holders. Note on
Ad hoc limit to Gold Card Exporter customers.

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(a) Relaxation in Service Charges for Gold Card Holder:

08
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(1) With a view to encourage Gold Card Holders, Bank will offer discount in charges and fee
structure for various services/ transactions vis-à-vis other exporters, on case to case basis
keeping in view the performance and income value of the account.
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(2) Bank will provide PCFC to Gold Card holders on priority basis.
(3) Documentation and other charges/ fees (processing fee etc.) may be levied initially as per the
main limits and difference amount of charges/ fees for standby limit may be recovered only upon
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availment of standby limits by Gold Card Holders.

(b) Tenure of the scheme:
The card will be issued for 3 years and will be renewed automatically for a further period of 3 years unless
there are adverse features/ irregularities in the account. Further, Bank will have right to recall the card at any
time in case of any misuse of the card or observance of any violation of the terms and conditions.

ECGC - Export Credit Guarantee Corporation’s Whole Turn over Policy:

(1) ECGC provides insurance cover to both Bank and Exporters. To mitigate the risks involved in
Export Finance by Bank, ECGC has introduced the Guarantee Cover to all the Bank as
mentioned below:

a) Pre Shipment Stage : Export Credit Insurance for Bank (ECIB– WTPC)
b) Post Shipment Stage : Export Credit Insurance for Bank (ECIB– WTPS)

(2) GM-IBD is vested with power to obtain the ECGC whole turnover Policy on Pre- Shipment
Export Credit (PC) & Post-Shipment Export Credit (PS).
 Normal Transit Period
 Concepts of normal transit period and notional due date are linked to concessional interest rate on
exportbills.

 Normal transit period comprises of the average period normally involved from the date of
negotiation/ purchase/discount till the receipt of bill proceeds.
It is not to be confused with the time taken for the arrival of the goods at the destination. Normal transit
period for different categories of export business are laid down as below:

Fixed Due Date No NTP

Bills in Foreign Currencies 25 days
Exports to Iraq under United Nations Guidelines Max 120 days

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Bills drawn in Rupees under Letters of Credit
Reimbursement provided at centre of negotiation 3 days
Reimbursement provided in India at centre different from centre of negotiation 7 days
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/20 57
Reimbursement provided by banks outside India 20 days
Exports to Russia under L/C where reimbursement is provided by RBI 20 days
Bills in Rupees not under Letter of Credit 20 days
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TT reimbursement under Letters of Credit (L/C)

Where L/C provides for reimbursement by electronic means 5 days
Where L/C provides reimbursement claim after certain number of days from the 5 days + this
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date of negotiation additional

period

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“Confidential-Strictly For Internal Circulation Only”

 :23
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IMPORT OF GOODS AND SERVICES

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Remittance of foreign exchange for Import of Goods and Services into India is being allowed in terms of
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Section 5 of the Foreign Exchange Management Act 1999 (42 of 1999), read with Notification No. G.S.R.
381(E) dated May 3, 2000 viz. Foreign Exchange Management (Current Account) Rules, 2000 as amended
from time to time. Subsequent amendments in regulatory framework are advised through RBI guidelines from
time to time.
Import trade is regulated by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce &
Industry, Department of Commerce, Government of India. Authorised Dealer Category – I (AD Category – I) 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 framed by the Government of India vide
Notification No. G.S.R.381 (E) dated May 3, 2000 and the Directions issued by Reserve Bank under Foreign
Exchange Management Act, 1999 from time to time.

(ii) AD branches should follow normal banking procedures and adhere to the provisions of Uniform Customs and
Practices for Documentary Credits (UCPDC), etc. while opening letters of credit for import into India on behalf of
their constituents.

(iii) Compliance with the provisions of Research & Development Cess Act, 1986 may be ensured for import of
drawings and designs.

(iv) AD branches may also advise importers to ensure compliance with the provisions of Income Tax Act,
wherever applicable.

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“Confidential-Strictly For Internal Circulation Only”

(v) Any reference to the Reserve Bank should first be made to the Regional Office of the Foreign Exchange
Department situated in the jurisdiction where the applicant person resides, or the firm / company functions, unless
otherwise indicated. If, for any particular reason, they desire to deal with a different office of the Foreign Exchange
Department, they may approach the Regional Office of its jurisdiction for necessary approval.

Import Licences

Except for goods included in the negative list which require licence under the Foreign Trade Policy in force, AD
Branches may freely open letters of credit and allow remittances for import. While opening letters of credit, the
‘For Exchange Control purposes’ 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
Branches may preserve the copies of utilised licences till they are verified by the internal auditors or inspectors.

Time Limit for Settlement of Import Payments

Time limit for Normal Imports

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(i) In terms of the extant regulations, remittances against imports should be completed not later than six
months from the date of shipment, except in cases where amounts are withheld towards guarantee of
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performance, etc.
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(ii) AD branches may permit settlement of import dues delayed due to disputes, financial difficulties,
etc. However, interest if any, on such delayed payments, usance bills or overdue interest is
payable only for a period of up to three years from the date of shipment.
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Time Limit for Deferred Payment Arrangements

Deferred payment arrangements (including suppliers’ and buyers’ credit) upto five years, are
treated as trade credits for which the procedural guidelines as laid down in the Master Circular
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issued by Reserve Bank of India for External Commercial Borrowings and Trade Credits and Bank
guidelines may be followed.
Time Limit for Import of Books
Remittances against import of books may be allowed without restriction as to the time limit,
provided, interest payment, if any, is as per the instructions in para C.2 of Section III of this
Circular.

Extension of Time
(i) AD branches can consider granting 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) irrespective of the invoice
value for delays on account of disputes about quantity or quality or non-fulfilment of terms of
contract; financial difficulties and cases where importer has filed suit against the seller. In cases
where sector specific guidelines have been issued by Reserve Bank of India for extension of time
(i.e. rough, cut and polished diamonds), the same will be applicable.

(II) While granting extension of time, AD Branch must ensure that:

a. The import transactions covered by the invoices are not under investigation by Directorate of Enforcement
/ Central Bureau of Investigation or other investigating agencies;
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“Confidential-Strictly For Internal Circulation Only”

 b. While considering extension beyond one year from the date of remittance, the total outstanding of the
importer does not exceed USD one million or 10 per cent of the average import remittances during the
preceding two financial years, whichever is lower; and

c. Where extension of time has been granted by the AD Branches, the date up to which extension has been
granted may be indicated in the ‘Remarks’ column.

(iii) Cases not covered by the above instructions / beyond the above limits, may be referred to the
concerned Regional Office of Reserve Bank of India after taking permission from concerned Circle
Office/Zonal Office (in case of LCBs) .

(iv) The above shall be reported in IDPMS as per message “Bill of Entry Extension” and the date up to
which extension is granted will be indicated in “Extension Date” column.
Import of Foreign Exchange into India

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A person may
(i) Send into India, without limit, foreign exchange in any form other than currency notes, bank notes and
travellers cheques;
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(ii) Bring into India from any place outside India, without limit, foreign exchange (other than unissued
notes), subject to the condition that such person makes, on arrival in India, a declaration to the
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Custom Authorities at the Airport in the Currency Declaration Form (CDF) annexed to these
Regulations; provided further that it shall not be necessary to make such declaration where the
aggregate value of the foreign exchange in the form of currency notes, bank notes or travellers
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cheques brought in by such person at any one time does not exceed USD 10,000 (US Dollars ten
thousand) or its equivalent and/or the aggregate value of foreign currency notes (cash portion) alone
brought in by such person at any one time does not exceed USD 5,000 (US Dollars five thousand) or
07 51

its equivalent.

Third Party Payment for Import Transactions

AD branches are allowed to make payments to a third party for import of goods, subject to conditions as under:
a. Firm irrevocable purchase order / tripartite agreement should be in place. However this requirement may
not be insisted upon in case 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.

b. AD branches should be satisfied with the bonafides of the transactions and should consider the Financial
Action Task Force (FATF) Statement before handling the transactions.

c. The Invoice should contain a narration that the related payment has to be made to the (named) third party.

d. Bill of Entry should mention the name of the shipper as also the narration that the related payment has to
be made to the (named) third party;

e. Importer should comply with the related extant instructions relating to imports including those on advance
payment being made for import of goods.

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“Confidential-Strictly For Internal Circulation Only”

 Issue of Guarantees by an AD Branch
1- An AD Branch may give a guarantee in respect of any debt, obligation or other liability incurred by a
person resident in India and owned to a person resident outside India, as an importer, in respect of
import on deferred payment terms in accordance with the approval by the Reserve Bank of India for
import on such terms duly recommended by the Circle Head or Zonal Head (in case of LCBs).
2- An AD branch may give guarantee in respect of any debt, obligation or other liability incurred by a
person resident in India and owned to a person resident outside India (being an overseas supplier of
goods, bank or a financial institution), for import of goods, as permitted under the Foreign Trade Policy
announced by Government of India from time to time and subject to such terms and conditions as may
be specified by Reserve Bank of India and as per Bank guidelines from time to time.
3- An AD branch may, in the ordinary course of his business, give a guarantee in favour of a non-resident
service provider, on behalf of a resident customer who is a service importer, subject to such terms and
conditions as stipulated by Reserve Bank of India and as per Bank guidelines from time to time:-
Provided that no guarantee for an amount exceeding USD 500,000 or its equivalent shall be issued
on behalf of a service importer other than a Public Sector Company or a Department / Undertaking of

:23
the Government of India / State Government:-
a. the AD Branches are satisfied about the bonafides of the transaction;

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b. the AD Branches ensure submission of documentary evidence for import of services in the normal course;

08
and
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c. the guarantee is to secure a direct contractual liability arising out of a contract between a resident and a
non-resident.
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d. Provided further that where the service importer is a Public Sector Company or a Department /
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Undertaking of the Government of India / State Government, no guarantee for an amount exceeding USD
100,000 or its equivalent shall be issued without the prior approval of the Ministry of Finance, Government
of India.

e. In case of invocation of the guarantee, the AD branches are required to submit to the Chief General
Manager-in-Charge, Foreign Exchange Department, Foreign Investments Division (EPD), Reserve Bank
of India, Central Office, Mumbai-400001 and copy to International Banking Division, Head Office, New
Delhi a report on the circumstances leading to the invocation of the guarantee.

Advance Remittance for Import of Goods

(i) AD Branches may allow remittance for import of goods without any
ceiling subject to the following conditions:

(a) In case the amount of advance remittance exceeds USD 200,000 or its
equivalent, an unconditional irrevocable SBLC or guarantee from an
international Bank of repute situated outside India or a guarantee of an AD
Bank in India which is backed by a counter guarantee from an international
Bank of repute situated outside India is obtained.

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“Confidential-Strictly For Internal Circulation Only”

 (b) In case the Importer (other than a public Sector Company or a Department
/Undertaking of the Government of India/State Government/s) is unable to
obtain irrevocable SBLC/Guarantee, the AD may waive the same keeping
in view the past track record of the importer customer for advance
remittance, up to USD 5.00 Million (in accordance to the powers
delegated).
S. No. Authorities Amount of advance remittance
1. CBB/MCC/PLP(IV & V) USD 0.20 to USD 0.50
2. ZOCAC-I & above Above USD 0.50 to USD 5.00
3. In charge LCB/eLCB USD 0.20 to USD 5.00
Note: - If, Branch is linked with MCC & PLP both, then waiver in case of non- borrowal
account shall be allowed by MCC.

Further, it is advised that at the time of fresh sanction / renewal / review /

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enhancement, the condition of waiver of obtaining SBLC/Guarantee may be
stipulated in sanction by the sanctioning authority.
All AD Branches including LCBs/eLCBs are advised to submit a statement at the
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end of every quarter giving details of advance remittances allowed by them to their
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respective Zonal Office as per prescribed format who, in turn, will monitor these
remittances with a view to ensure that Bank guidelines in this regard are being
complied with.
/11 89

A Public Sector Company or a Department /Undertaking of the Government of

India/State Government/s which is not in a position to obtain a guarantee
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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.
(ii) All payment towards advance remittance for import shall be subject to the
specified conditions and AD branches/TFC are required to create outward
remittance message (ORM) for all such outward remittances in IDPMS and
follow other extant IDPMS guidelines.

Advance Remittance for the Import of Services

AD branch may allow advance remittance for import of services without any ceiling subject to
the following conditions:

(iii) Where the amount of advance exceeds USD 500,000 or its equivalent, a guarantee
from a bank of international repute situated outside India, or a guarantee from an AD
Category – I bank in India, if such a guarantee is issued against the counter-

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“Confidential-Strictly For Internal Circulation Only”

 guarantee of a bank of international repute situated outside India, should be obtained
from the overseas beneficiary.

(iv) 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 for advance remittance for import of services without bank
guarantee for an amount exceeding USD 100,000 (USD One hundred thousand) or its
equivalent would be required.

AD branch should also follow-up to ensure that the beneficiary of the advance
remittance fulfils his obligation under the contract or agreement with the remitter in
India, failing which, the amount should be repatriated to India.
All payments toward advance payments for imports shall be subject to specified
conditions, creation of Outward Remittance Message for all such remittances and

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following of IDPMS Guidelines of Reserve bank of India.

All payments towards advance remittance for imports shall be subject to

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the following conditions:
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All advance payments against Import of Goods and Services shall be executed by
Trade Finance Centers after ensuring meticulous compliance of RBI/Bank’s
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guidelines.
(1) The importer is a customer of the bank.
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(2) The customer’s account is fully compliant with Reserve Bank’s extant
KYC/AML guidelines. KYC and due diligence exercise is required to
be done by the AD branches for the Indian importer entity as well as
the overseas manufacturer/ supplier.
(3) The AD branches should undertake the transactions based on
commercial judgment and after being satisfied about the bonafides of the
transactions and purpose of remittances.
(4) Advance payments should be made strictly as per terms of the sale
contract/Performa Invoice and should be made directly to the account of
the manufacturer/ supplier concerned.
(5) Physical import of goods into India should be made within six months
(three years in case of capital goods) from the date of remittance and
the importer should give an undertaking at the time of remittance to
furnish documentary evidence of import, within fifteen days from the
close of the relevant period.

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 (6) AD branches should follow up for submission of documentary evidence
of import into India. In the event of non-import of goods, AD branches
should ensure that the amount of advance remittance is repatriated to
India or is utilized for any other purpose for which release of exchange
is permissible under the Act, Rules or Regulations made there under.
(7) Financial standing and past track record of the importer is satisfactory.
(8) In case of borrowers, the facility is to be extended to those with
satisfactory track record and having good credit rating.
(9) Credit Report on Foreign Supplier/Manufacturer/Service provider from
IBD approved credit rating agencies or approved foreign correspondent
Banks in case of advance remittance/Contract of USD 100,000 and
above or equivalent be obtained, as due diligence,. Credit report should
not have any adverse remarks on the overseas company with regards to
its conduct/financial irregularity in overseas market etc.

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Receipt of Import Bills/Documents
Receipt of import documents by the importer directly from overseas suppliers
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Import bills and documents should be received from the banker of the supplier by the banker of the importer in
India. AD branches should not, therefore, make remittances where import bills have been received directly by the
importers from the overseas supplier, except in the following cases:
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1- Where the value of import bill does not exceed USD 300,000
2- Import bills received by wholly-owned Indian subsidiaries of foreign companies from their principals.
3- 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.
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4- Import bills received by all limited companies viz. public limited, deemed public limited and private limited
companies.

Receipt of import documents by the importer directly from overseas suppliers in case of specified
sectors
As a sector specific measure, AD Branches 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 as defined in the Foreign
Trade Policy 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 Branches may undertake such transactions
subject to the following conditions:

1- The import would be subject to the prevailing Foreign Trade Policy.

2- The transactions are based on their commercial judgment and they are satisfied about the bonafides of
the transactions.
3- AD Branches should do the KYC and due diligence exercise and should be fully satisfied about the
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“Confidential-Strictly For Internal Circulation Only”

 financial standing / status and track record of the importer customer. Before extending the facility, they
should also obtain a report on each individual overseas supplier from the overseas banker or reputed
overseas credit rating agency about the satisfactory financial standing/status and track record of the
overseas supplier.

Receipt of import documents by the AD branches directly from overseas suppliers

1- At the request of importer clients, AD branches may receive bills directly from the overseas
supplier as above, provided the import transactions are as per the prevailing Foreign Trade Policy.
AD branches should carry out the KYC and due diligence exercise and should be fully satisfied
about the financial standing / status and track record of the importer customer.
2- Before extending the facility, the AD branches should obtain a report on each individual overseas
supplier from the overseas banker or a reputed overseas credit agency. However, such credit
report on the overseas supplier need not be obtained in cases where the invoice value does not
exceed USD 300,000 provided the AD branches is satisfied about the bonafides of the transaction
and track record of the importer constituent

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3- A sub register has been devised under CBS menu MIIB-FIBC, named as “FIBCFIBDD” for lodging
all import bills where Import documents received directly by Bank/Importer from the overseas
supplier
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4- Officials at Trade Finance Centre (TFC) are advised to lodge all such bills under the CBS menu
“MIIB-FIBC-FIBCFIBDD” complying all above guidelines
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Evidence of Import
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Physical Imports
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 branches through which the relative remittance was made, to ensure that the
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importer submits :-
1- The importer shall submit BoE number, port code and date for marking evidence of import under
IDPMS
2- Customs Assessment Certificate or Postal Appraisal Form, as declared by the importer to the Customs
Authorities, where import has been made by post, or Courier Bill of Entry as declared by the courier
companies to the Customs Authorities in cases where goods have been imported through couriers, as
evidence that the goods for which the payment was made have actually been imported into India, or
3- For goods imported and stored in Free Trade Warehousing Zone (FTWZ) or SEZ Unit warehouses or
Customs bonded warehouses, etc., the Exchange Control Copy of the Ex-Bond Bill of Entry or Bill of
Entry issued by Customs Authorities by any other similar nomenclature the importer shall submit
applicable BoE number, port code and date for marking evidence of import under IDPMS
4- In respect of imports on Delivery against acceptance basis, AD Category – I bank shall verify the
evidence of import from IDPMS at the time of effecting remittance of import bill. However, if importers
fail to produce documentary evidence due to genuine reasons such as non- arrival of consignment,
delay in delivery/ customs clearance of consignment, etc., AD branches may, if satisfied with the
genuineness of request, allow reasonable time, not exceeding three months from the date of
remittance, to the importer to submit the evidence of import.
5- AD branches are required to create Outward Remittance Message (ORM) for all such outward
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“Confidential-Strictly For Internal Circulation Only”

 remittances irrespective of value and shall perform the subsequent activity viz document submission,
outward remittance data, matching with ORM, closing of transactions etc. as per IDPMS guidelines.

Evidence of Import in Lieu of Bill of Entry

AD branches 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 provided :-
1- The amount of foreign exchange remitted is less than USD 1,000,000 or its equivalent and
2- The importer is a company listed on a stock exchange in India and whose net worth is not less than
Rs.100 crore as on the date of its last audited balance sheet, or, the importer is a public sector
company or an undertaking of the Government of India or its departments.

3- The above facility may also be extended to autonomous bodies, including scientific bodies/academic
institutions, such as Indian Institute of Science / Indian Institute of Technology, etc. whose

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accounts are audited by the Comptroller and Auditor General of India (CAG). AD branches shall
insist on a declaration from the auditor/CEO of such institutions that their accounts are audited by
CAG.
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08
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Non-physical Imports
1- Where imports are made in non-physical form, i.e., software or data through internet / datacom
channels and drawings and designs through e-mail / fax, a certificate from a Chartered Accountant that
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the software / data / drawing/ design has been received by the importer, may be obtained.
2- AD branches should advise importers to keep Customs Authorities informed of the imports made by
them under this clause.
07 51

Follow-up for Import Evidence

AD branches will continue to follow up for outward remittance made for import (i.e. unsettled ORM) in
terms of extant guidelines and instructions on the subject. In cases where relevant evidence of import
data is not available in IDPMS on due dates against the ORM, AD branches will follow up with the
importer for submission of documentary evidence of import. In case an importer does not furnish any
documentary evidence of import, as required, within 3 months from the date of remittance involving
foreign exchange irrespective of value, the AD Branch should rigorously follow-up for the next 3
months as per following instructions:-

Letter by speed post/ registered post Immediately after entry becomes overdue
(i.e. 3 months from the date of remittance)
1st Reminder by speed post / registered post After 30 days from the date of above letter

2nd Reminder by speed post / registered post After 30 days from the date of 1st
Reminder

If such entry remains overdue, even after aforementioned reminders, a final reminder is to be sent to the
customers immediately after six months from date of remittance by AD branch, cautioning them against the
consequences. And, if, proof of import or reason to the satisfaction of AD Branches is not provided by the
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“Confidential-Strictly For Internal Circulation Only”

customer, such cases be referred to Directorate of Enforcement and STR filing may also be resorted to by AD
Branches under intimation to CO, ZO and IBD-HO.

Merchanting Trade
AD branches may handle the Merchanting Trade Transactions (MTT) subject to the following guidelines:

(i) For a trade to be classified as Merchanting trade, goods acquired shall

not enter the Domestic Tariff Area.
(ii) Considering that in some cases, the goods acquired may require certain
specific processing/ value-addition, the state of goods so acquired may
be allowed transformation subject to the AD branch/TFC being satisfied
with the documentary evidence and bonafides of the transaction.

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(iii) The MTT shall be undertaken for the goods that are permitted for exports
/ imports under the prevailing Foreign Trade Policy (FTP) of India as on
the date of shipment. All rules, regulations and directions applicable to
22 1
exports (except Export Declaration Form) and imports (except Bill of

08
Entry) shall be complied with for the export leg and import leg
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respectively.
AD branch shall satisfy itself with the bonafides of the transactions.
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Further, KYC and AML guidelines shall be scrupulously adhered to by the AD

branch while handling such transactions.
(iv) The entire Merchanting trade is to be routed through the same AD bank
07 51

(branch). The AD branch 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 A D branch 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 branch shall ensure that the
requisite details are made available/retrievable at the time of
Inspection/Audit/investigation of the transactions.
(v) 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. 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.
(vi) Short-term credit either by way of suppliers' credit or buyers’ credit may
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“Confidential-Strictly For Internal Circulation Only”

 be extended for MTT to the extent not backed by advance remittance for
the export leg, including the discounting of export leg LC by the AD
branch, as in the case of import transactions. However, Letter of
Undertaking (LOU)/ Letter of Comfort (LOC) shall not be issued for
supplier’s/ buyer’s credit.
(vii) 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 and
the liability of the import leg, as soon as it arises, shall be extinguished
out of these funds without any delay. If such receipts are kept in interest-
bearing INR account, hedging thereof may be allowed by the AD branch
at the request of its customer, as per extant regulations. No fund/non-

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fund-based facilities shall be extended against these balances.
(viii) In case of discounting of export leg LC where payment for import leg is
still to be made (even if partially), the proceeds shall be utilized in the
22 1
08
manner prescribed at point no. (viii) above.
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(ix) Payment for import leg may also be allowed to be made out of the balances
in EEFC account of the merchant trader. Merchanting traders may be
allowed to make advance payment for the import leg on demand
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made by the overseas supplier. In case where inward remittance

from the overseas buyer is not received before the outward
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remittance to the overseas supplier, AD Branch may handle such

transactions based on its commercial judgment. Before making
Advance Remittance, AD Branches have to ensure following
guidelines:

a) Credit Report to be obtained on Foreign Supplier/ Manufacturer/

Buyer from IBD approved credit rating agencies or approved
foreign correspondent Banks in case of advance remittance of
USD 100,000 and above or equivalent. Credit report should not
have any adverse remarks on the overseas company with
regards to its conduct/financial irregularity in overseas market
etc.

b) The AD branches should also follow-up to ensure that the

beneficiary of the advance remittance for the import leg fulfils his
obligation under the contract or agreement with the remitter in
India.

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“Confidential-Strictly For Internal Circulation Only”

 c) Any advance remittance beyond USD 100,000 or equivalent per
transaction / contract for import leg is to be covered by Bank
Guarantee / an unconditional, irrevocable standby Letter of Credit
from an approved Bank. Delegated powers to waive guarantee in
such cases is as under:

Delegated powers to waive guarantee from USD 100,000 to USD 500,000

Type of
S. N. Officer with delegated power
Account
 Respective Sanctioning Authority.
 If waiver of guarantee is not mentioned in
Sanction: In-charge CBB / LCB / eLCB may allow
1 Borrowal waiver in Borrowal account of their Branch, only if
credit limit for Merchanting Trade Transaction has

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been specifically permitted by Sanctioning
Authority.
Non-  In-charge CBB / LCB / eLCB for their branch; and
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2 Borrowal
08
 DGM at respective Zonal office for all other
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branches
(x)
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a) It may, however, be ensured that any such advance payment for

an import leg beyond USD 500,000 per transaction, shall be made
07 51

against Bank Guarantee /an unconditional, irrevocable standby

Letter of Credit from an international bank of repute.

b) In case of borrower customer, No Advance Remittance will be

permitted by allowing credit facility unless it is specifically
permitted by Sanctioning Authority.

(xi) Letter of Credit to the supplier for the import leg is permitted against
confirmed export order, keeping in view the foreign exchange outlay of
four months and completion of the MTT within nine months and subject
to compliance with the instructions issued by Department of Banking
Regulation on “Guarantees and Co-acceptances”, as amended from
time to time.
(xii) TFCs shall ensure one-to-one matching in case of each MTT and report
defaults in any leg by the traders to the concerned Regional Office of
the Reserve Bank, on half yearly basis on prescribed Performa within
15 days from the close of each half year, i.e. June and December;
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“Confidential-Strictly For Internal Circulation Only”

 (xiii) Merchant traders with outstanding of 5% or more of their annual export
earnings shall be liable for caution listing.

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 branches 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.13.3 WRITE-OFF OF UNREALIZED AMOUNT OF EXPORT LEG:

(i) AD branch may write-off the unrealized amount of export leg, without any

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ceiling, on the request made by the Merchanting trader, in the following
circumstances:
a) The MTT buyer has been declared insolvent and a certificate from the
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08
official liquidator specifying that there is no possibility of recovery of
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export proceeds has been produced.
b) The goods exported have been auctioned or destroyed by the
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Port/Customs / Health authorities in the importing country and a

certificate to that effect has been produced.
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c) The unrealized amount of the export leg represents the balance due in
a case settled through the intervention of the Indian Embassy, Foreign
Chamber of Commerce or similar Organization;

Provided, the MTT is in adherence to all other provisions except the delays
in timelines (either for outlay or completion period of MTT or both) attributed
to reasons mentioned at a, b and c above.

(ii) In addition to above, write-off as at (i) shall be subject to following

conditions:

a) AD branch shall satisfy itself with the bonafides of the transactions and
ensure that there are no KYC/AML concerns.
b) The transaction shall not be under investigation under FEMA by any
of the investigating agency/ies.
c) The counterparty to the merchant trader is not from a country or

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“Confidential-Strictly For Internal Circulation Only”

 jurisdiction in the updated FATF Public Statement on High Risk & Non-
Co-operative Jurisdictions on which FATF has called for counter
measures.
(iii) Competent authority to permit write-off of the unrealized amount of export
leg recommended by the AD branches in terms of RBI guidelines will be as
under:
ZOCAC is vested with powers to write-off in respect of branches under their
jurisdiction, and In-charge CBB / LCB / eLCB is vested with powers to write-
off for their own branch.

THIRD PARTY PAYMENTS

Third party payments for export and import legs of the MTT are not allowed.

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Processing of import related payments through Online Payment Gateway Service
Providers (OPGSPs)
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AD branches have been permitted to 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 the following:-
1- The balances held in the Import Collection account shall be remitted to the respective overseas
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exporter's account immediately on receipt of funds from the importer and, in no case, later than two
days from the date of credit to the collection account.
2- The AD Category –I bank will obtain a copy of invoice and airway bill from the OPGSP containing the
07 51

name and address of the beneficiary as evidence of import and report the transaction in R-Return
under the foreign currency payment head.
3- Bank is yet to enter into arrangement with any of the OPGSPs for import related payments. In case of
any such arrangements, the detailed modalities of OPGSPs in lines with RBI directions will be
conveyed to field functionaries through separate notification.

ESTABLISHING LETTERS OF CREDIT:

a) Authorized Branches are required to see the underlying contract/order /indent with
overseas supplier in original for perusal and verification of essential particulars
before opening the letter of credit.
b) The application for Letters of Credit should be scrutinized to ensure that all
essential particulars have been given. Further, it should also be ensured that
various terms & conditions do not violate the laid down procedures and FEMA
regulations, UCPDC rules, Import and Export policy, guidelines in force and
specific guidelines issued by Bank through Book of Instructions, System and
Operating Procedure for opening of Import Letter of Credit.

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“Confidential-Strictly For Internal Circulation Only”

 TRANSPORT DOCUMENTS:

“BUYER BEWARE” should be the principle in all deals and the buyer has to ensure through his Bank and agents
that goods are loaded in the vessel of repute and well known shipping company. Exporters and importers must
keep away from unknown charterers. In order to safeguard bank’s as well as importers’ interest, certain guidelines
have been given to branches in regard to the stipulation in the import Letter of Credit.

Stipulation regarding carrying vessel may be waived only in the case of importers of good standing and the
name of carrying vessel is given in the Insurance Policy/Cover. In case of insurance cover obtained in India
where name of carrying vessel is not given, this stipulation is to be waived only with the concurrence of the
underwriters (Insurers) and the stipulation required by the insurers are to be given.

Branches are advised not to open Letters of Credit, calling for Bill of Lading/Airway Bill or Post Parcel in their
own name (without indicating the name of the importer who should invariably be the opener of the Letter of

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Credit). As this would leave room for misuse by means of change of ownership subsequent to importation in
violation of clause 5(3) (iii) of the Import Trade Control Order, 1955 – the Collector of Customs has informed
that in such cases the Authorised Branch named in the relative Bill of lading/Airway Bill/Post Parcel will be
treated as the importer with the attendant responsibilities.
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/20 57
In case of request from the importer that the Letter of Credit be got confirmed by advising bank, necessary
instructions for confirmation should only be issued after explaining to the importer that they should be sure about
integrity of the beneficiary.
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In case of import of raw material, edible oils and chemicals etc. a certificate of quality from General
Superintendence Company or a similar agency should be called for.
The letter of credit should invariably be advised through one of our correspondent banks and normally restricted to
them.
07 51

Further, while issuing Import Letter of Credit, AD branches are advised to mention invariably a condition that
“Any manual amendment/rectification on Bill of Lading is not acceptable”. This may lead to non
realization of insurance claim, if any, in case any eventuality.

POWER FOR ALLOWING OPENING OF IMPORT LC IN CERTAIN CASES:

 Charter Party / Tanker / House Bill of Lading

 Third Party Bill of Lading
 Forwarders’ Cargo Receipt
 House Airway Bill / AWB issued by freight forwarder
 Age of the carrying vessel beyond prescribed 20 years
 Blank Back / Short Form Bill of Lading
 Shipping documents issued prior to the date of credit
 Acceptance of stale documents.
 Containing a provision that goods can be carried on deck.
 Any other operational issue related to opening of Import LC.
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“Confidential-Strictly For Internal Circulation Only”

 i. CHCAC and above may allow opening of import LC with mentioned clauses at
the time of regular sanction / renewal / review. Thus for sanctioning authority up
to MCC, CHCAC may consider opening of import LC with relaxation in the
mentioned clauses.

ii. In case of borrowal accounts of CBB/LCB/eLCB, where mentioned clauses are

not part of regular sanction, power to allow any of the mentioned clauses, in the
interim shall be as under:

Borrowal Account Power to allow mentioned clauses

In case of borrowal accounts of CBB ZOCAC
In case of borrowal accounts of In-charge of LCB / eLCB Head
LCB/eLCB

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Further, at the time of fresh sanction / renewal / review / enhancement the approval
be obtained in the regular sanction from the sanctioning authority as defined in
clause (i) above. 22 1
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/20 57
INSURANCE:
/11 89

In case of contract on Ex Works, FOB and C&F basis, branches must ensure that
appropriate insurance cover is obtained before opening the letter of credit. Branches
obtaining insurance cover in India should go through the various stipulations in the cover
07 51

note/insurance policy regarding carrying vessel and ensure that these are invariably
incorporated in the letter of credit. All stipulations should be clear and specific and any
onerous clause as “subject to usual Marine Insurance Clause” or “shipment by first class
steamer” should not be accepted. If FLC is opened with “Transshipment Clause”,
“Transshipment Risk” should be covered under shipping insurance policy/cover note.
Branches without direct authorization while forwarding applications for opening letters of credit
on FOB or C & F basis will confirm that insurance cover has been obtained and also advise the
stipulations in the cover note/insurance policy regarding carrying vessel to the letter of credit
opening office, without which the letter of credit will not be established by the Authorized
Branch.

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“Confidential-Strictly For Internal Circulation Only”

 CLAUSES NOT TO BE INCORPORATED IN IMPORT LETTERS OF
CREDIT:
Any clause in the following effect should not be incorporated in the Import Letters of Credit under any
circumstances whether opened in favour of foreign sellers or in favour of agencies in charge of the
canalized imports such as State Trading Corporation, Minerals & Metals Trading Corporation etc.

“Documents with discrepancies would be acceptable.”

CLAUSES TO BE INCORPORATED IN IMPORT LETTERS OF CREDIT:

The AD branches while opening import letters of credit should invariably incorporate a clause instructing
our foreign correspondents/negotiating bank to inform immediately through authenticated SWIFT
message as & when negotiation equivalent of USD 1,00,000 or above and equivalent currency (to be
denominated in the currency of credit) takes place.

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OPENING OF STAND-BY LETTERS OF CREDIT:

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(a) Traditionally Letters of Credit (LC) governed by Uniform Customs & Practice for Documentary Credits-

08
International Chamber of Commerce (ICC) Publication No. 600 (UCPDC) enable the seller to obtain
/20 57
payment after fulfilling his obligations as evidenced by the presentation of the documents stipulated under
the LC. Standby LC is often used to cover the “non-performance” situation. As such, standby LCs act
almost like a substitute for guarantees.
/11 89

(b) AD Branches are allowed to open Standby Letters of Credit on behalf of their importer constituents for
import of goods into India, the import of which is permissible under the EXIM Policy after establishing
proper Non Fund based limit.
07 51

FEDAI, in consultation with RBI and after examining the various provisions has decided to adopt ISP-98
(International Standby Practices-98). ISP 98 is the set of rules that governs standby letters of credit. They
have been published by ICC Banking Commission. Hence it will be in order for AD Branches to issue
stand-by LC either under ISP-98 or UCP-600 as agreed upon mutually by the parties concerned.

“Branches to obtain, invariably a copy of underlying contract(s)/Performa Invoice(s) and document(s) of

the transaction before undertaking issuance of SBLC to ensure that SBLC is issued in line with contract
and any onerous clause detrimental to bank
interest is dealt suitably”.

Invocation of the commercial SBLC by the beneficiary is to be supported by proper evidence. The
beneficiary of the credit should furnish a declaration to the effect that the claim is made on account of
failure of importer to abide by his contractual obligations along with the following documents:
1- A copy of invoice
2- Non-negotiable set of documents including copy of nonnegotiable Bill of Lading/ transport
documents.
3- A copy Lloyds/SGS inspection certificate wherever provided for as per the Underlying
contract.

OPENING OF TRANSFERABLE LETTERS OF CREDIT:

Reserve Bank of India permits opening of transferable letters of credit for import of goods into India
providing for transfer of interest from first beneficiary subject to the following conditions:-

International Banking Page 89

 1- Both the beneficiaries are resident in the same country or in two different countries but are
not members of the Asian Clearing Union.
2- The transfer does not come in the way of compliance with the regulations relating to
permitted methods of payment.
3- Letters of credit are not permitted to be opened in favour of or transferred in favour of a
supplier resident in a country with which trade has been banned by the Government of India.
4- Branches while opening the transferable LCs must superimpose a clause above the column,
Irrevocable Documentary Credit No._________reading “This credit is transferable within
________”(nameof the country (ies) as per request of the applicant.)
5- Branches are advised to scrutinize applications for opening of transferable
Letters of Credit with due care and they should advise their importer the
risks attached to such LCs.

DELAY IN PAYMENTS OF IMPORT BILLS DRAWN UNDER FOREIGN LETTER

OF CREDIT ISSUED BY BRANCHES
In terms of Article 7 of the ICC Rule UCPDC 600, it is incumbent upon the L/C issuing bank to honour
payment on due date upon complying terms & condition of the L/C.

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The delay in payment of bills received under LCs issued by the branches is huge reputational risk the
banks carry and foreign correspondent may discontinue relationship with us or refuse to accept Foreign
Letter of Credit issued by our branches, which will put the bank into business loss.
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08
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Accordingly, branches are advised to maintain proper due date dairy for payments of import bills under
L/C and system of advance monitoring be put in place to avoid such delay. Further, in case of any
deliberate delay in honouring payments on due date, suitable action will be initiated against the erring
official of the respective branch.
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Nostro Accounts maintained by our Bank- Issuance of Debit authorisation by

branches
07 51

As per these guidelines any of our authorised branches can operate upon the foreign currency
Nostro accounts maintained by our Bank with various correspondent banks and also issue Debit
authorisations. However, it should be ensured that the Nostro account has been appropriately
funded for carrying out such Debit authorisations or necessary credit exists in the account prior to
issuing a Debit authorisation to the correspondent bank. Issuing a Debit authorisation without
ensuring availability of credit in the Nostro account / funding the Nostro could result in an
overdraft.

It is noticed that several customers of our Bank avail Buyer’s Credit from our branches in Dubai and Hong
Kong. The amount representing Buyer’s Credit is credited by these overseas branches to the respective
Nostro account. However, it is observed that branches who arrange for such buyer’s credit issue Debit
authorisation on these Nostro accounts without ascertaining the availability of corresponding credit entry
representing the amount of Buyer’s Credit.

It is further noticed that the corresponding credit / funding is received 2-3 days after the issuance of the
Debit authorisation.

Branches are, therefore, advised to enquire/ verify from Treasury Division, Mumbai on availability of funds
representing the amount of Buyer’s Credit before issuing any Debit authorisation on Nostro accounts.

International Banking Page 90

 Outward / Inward Remittances Policy (ORM/ IRM)

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OUTWARD REMITTANCES
22 1
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Broadly, outward Remittances have been classified in two parts, Liberalized Remittance Scheme in
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terms of RBI Mater Direction No. 7/2015-16 dated January 1, 2016 (Updated as on June 20, 2018) and
Other Remittances Facilities in terms of RBI Master Direction No. 8/2015-16 dated January 1, 2016
(Updated as on November 6, 2018).
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Liberalised Remittance Scheme

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In terms of Section 5 of the FEMA, persons resident in India, resident individuals, including minors, are
allowed to freely remit up to USD 2, 50,000 per financial year (April – March) for any permissible current
or capital account transaction or a combination of both. Remittances under the LRS can be consolidated
in respect of family members subject to individual family members complying with its terms and
conditions.
However, clubbing is not permitted by other family members for capital account transactions such as
opening a Bank Account/Investment/Purchase of Property, if they are not the coowners/co-partners of the
overseas bank account/ investment/property. Further, a resident cannot gift to another resident, in foreign
currency, for the credit of the latter’s foreign currency account held abroad under LRS. The Scheme is
not available to corporate, partnership firms, HUF, Trusts, etc

The limit of USD 2,50,000 per Financial Year (FY) under the Scheme includes remittances for Capital
account transactions and Current account transactions (viz. private visit; gift/donation; going abroad on
employment; emigration; maintenance of close relatives abroad; business trip; medical treatment abroad;
studies abroad) available to Resident Individuals under Para 1 of Schedule III to Foreign Exchange
Management (Current Account Transactions) Amendment Rules, 2015 dated May 26, 2015.

Permissible CAPITAL ACCOUNT transactions by an individual under LRS:

a) Opening of foreign currency account abroad with a bank.

b) Purchase of property abroad.
c) Making investments abroad.

International Banking Page 91

d) Setting up Wholly Owned Subsidiaries and Joint Ventures (with effect from August
05, 2013) outside India for bonafide business activities subject to the stipulated
guidelines in IBD Circular No. 8/2017 dated 17th January 2017 and subsequent
amendments issued from time to time .
e) Extending loans including loans in Indian Rupees to Non-resident Indians (NRIs) who
are relatives as defined in Section 2 (77) of the Companies Act, 2013.

Remittances under LRS is not permitted 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 [Link] or as notified by the Reserve
Bank of India. Remittances directly or indirectly to those individuals and entities identified as posing
significant risk of committing acts of terrorism as advised separately by the Reserve Bank of India to the
banks is also not permitted.

Permissible CURRENT ACCOUNT transactions by an individual under LRS:

a) Private visits abroad (Other than Nepal and Bhutan)
b) Gift/donation
c) Going abroad on employment

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d) Emigration
e) Maintenance of close relatives abroad
f) Business trip
g) Medical treatment abroad 22 1
08
h) Facilities available to students for pursuing their studies abroad
/20 57
It is mandatory for the Resident Individual to provide his/her Permanent Account
Number (PAN) to make remittance under the Scheme.
/11 89

While allowing the facility to resident individuals, Branches are required to ensure that
“Know Your Customer” guidelines have been implemented in respect of bank accounts. They should also
comply with the Anti-Money Laundering Rules in force while allowing the facility.
07 51

Drawal of foreign exchange which includes use of International cards viz. WTC, ICC, IDC and ATM
Card etc. are also covered under Liberalized Remittances scheme under the category of “Any other
current account transaction”.

For Private Visits Abroad

 For private visits abroad, other than to Nepal and Bhutan, any resident individual can obtain
foreign exchange up to an aggregate amount of USD2,50,000, from an Authorised Dealer
or FFMC, in any one financial year, irrespective of the number of visits undertaken during
theyear.

 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 LRSlimit.

 The tour operator can collect this amount either in Indian rupees or in foreign
currency from the resident traveler.

International Banking Page 92

 Gift/donation
Any resident individual may remit up-to USD 2,50,000 in one FY as gift to a person residing
outside India or as donation to an organization outside India.

Going abroad on employment

A person going abroad for employment can draw foreign exchange up to USD 2,50,000 per FY
from any Authorised Dealer in India

Emigration
 A person wanting to emigrate can draw foreign exchangeup to the amount prescribed by
the country of emigration or USD250,000

 Remittance of any amount of foreign exchange outside India in excess of this limit may be

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allowed only towards meeting incidental expenses in the country of immigration.

Maintenance of close relatives abroad

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A resident individual can remit up-to USD 2,50,000 per FY towards maintenance of close relatives.
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Business trip

 Visits by individuals in connection with attending of an international conference, seminar,

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specialized training, apprentice training, etc., are treated as business visits.

 For business trips to foreign countries, resident individuals can avail of foreign exchange up
07 51

to USD 2,50,000 in a FY irrespective of the number of visits undertaken during the year.

 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 by the AD without any limit, subject to verifying the
bonafides of the transaction.

Medical treatment abroad

 Authorised Dealers may release foreign exchange up to an amount of USD 2,50,000 or its
equivalent per FY without insisting on any estimate from ahospital/doctor.

 For amount exceeding the above limit, Authorised Dealers may release foreign exchange
under general permission based on the estimate from the doctor in India or hospital/ doctor
abroad.

 A person who has fallen sick after proceeding abroad may also be released foreign
exchange by an Authorised Dealer (without seeking prior approval of the Reserve Bank of
India) for medical treatment outsideIndia.

 In addition to the above, an amount up to USD 250,000 per financial year is allowed to a

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 person for accompanying as attendant to a patient going abroad for medical
treatment/check-up.

Facilities available to students for pursuing their studies abroad

 AD Category I banks and AD Category II, may release foreign exchange up toUSD
2,50,000 or its equivalent to resident individuals for studies abroad without insisting on
any estimate from the foreign University.

 AD Category I bank and AD Category II may allow remittances (without seeking prior
approval of the Reserve Bank of India) exceeding USD 2,50,000 based on the estimate
received from the institution abroad.

 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

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available on FATF website [Link] or as notified by the ReserveBank.

Documents
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 It is mandatory to have PAN card to make remittances under the Scheme for capital
/20 57
accounttransactions.
 PAN card need not be insisted upon for remittances made towards permissible current
account transactions up to USD25,000.
/11 89

 The resident individual seeking to make the remittance should furnish 6 Form A2 as at
Annex for purchase of foreign exchange under LRS.

Facility to grant loan in rupees to NRI/ PIO close relative under the
07 51

Scheme
Resident individual is permitted to lend to a Non-resident Indian (NRI)/ Person of Indian Origin
(PIO) close relative subject to the following conditions

 The loan is free of interest and the minimum maturity of the loan is oneyear
 The loan amount should be within the overall limit under the Liberalised Remittance
Scheme of USD 2,50,000 per financial year available for a residentindividual.
 The loan shall be utilized for meeting the borrower‟s personal requirements or for his own
business purposes in India
 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 The
business of chit fund, or Nidhi Company, or Agricultural or plantation activities or in real
estate business, or construction of farm houses, or Trading in Transferable Development
Rights(TDRs).
 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 NROa/c.
 The loan amount shall not be remitted outsideIndia.
 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) /

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 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.

Inward Remittances:

Our Bank operates through different schemes of payment transfers, ranging from
traditional modes like cheques and drafts to more advanced, easier and faster
transmission channels. All inward Remittances are channelized through our
International Service Branch, Delhi, which acts as a Centralised Nodal Office for all
Inward Remittances, which can be broadly classified as under:

1. Personal Cheques (issued by the overseas remitter)

2. Demand Drafts issued by overseas banks
3. Remittances received through Swift
4. MTSS (Money Transfer Service Schemes)

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5. Rupee Drawing Arrangements (Drafts / Speed Remittance

Personal Cheque & Demand Drafts: 22 1

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Foreign Currency DDs are directly sent to Treasury Division by the branches and
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proceeds are received in Non-Customer account of the branch.

MTSS (Money Transfer Service Scheme):

/11 89

RBI vide their Master Direction No. RBI/FED/2016-17/52 FED No.1/2016-17 dated 22
February 2017, issued guidelines on Money Transfer Service Scheme (MTSS) for ADs
07 51

which is summarized as, MTSS is a quick and easy way of sending personal
remittances from abroad to beneficiaries in India, mainly in the form of cash payment.
1- Only personal remittances are allowed through this Arrangement.
2- Trade related remittances, remittance towards purchase of property,
investments, donations / contributions to charitable institutions / trusts are not
permitted.
3- A cap of US$ 2,500 has been placed on individual transaction and amounts up to
Rs.50, 000/- may be paid in cash.
4- Any amount exceeding this limit shall be paid by means of cheque/demand
draft/pay orders or credited directly to the beneficiary’s account (other than
NRE/FCNR).
5- Only 30 remittances can be received by a single individual beneficiary under the
scheme during a calendar year.
6- Branches, not having Internet facility, can handle remittances through CBS menu
“MTSS”.
7- Presently, we have arrangement with overseas agent “Transfast”.
8- For any approval of Principal Agent GM-IBD is empowered to approve,
ensuring eligibility criteria as defined in RBI guidelines.

Remittances Through Rupee Drawing Arrangements (RDAs):

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Draft Drawing Arrangement :
Drafts are issued by the Exchange Houses, drawn on our International Service Branch,
New Delhi (payable at all branches in India). All branches are authorized to make the
payment. The exchange Houses maintain adequate funding for in their respective
Vostro accounts for honoring the dedicated DD accounts.

Speed Remittance arrangement:

Under Speed Remittance procedure, Exchange Houses upload payment instructions on
a file format through Corporate Internet Banking Service. The files uploaded by
Exchange Houses are checked and approved by ISB, and respective accounts of
beneficiaries are credited through the processes followed by ISB.

Purchases of Foreign Currency from Public:

1- All AD Branches are authorised to freely purchase foreign currency and travellers
cheques from residents as well as nonresidents.
2- Where the foreign currency was brought in by declaring on form CDF, the renderer

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should be asked to produce the same.
3- The production of declaration in CDF should invariably be insisted upon.
4- Requests for payment in cash in Indian Rupees to resident customers towards
22 1
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purchase of foreign currency notes and/ or Travellers’ Cheques from them may be
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acceded to the extent of only USD 1,000 or its equivalent per transaction.
5- Requests for payment in cash by foreign visitors / Non-Resident Indians may be
acceded to the extent of only USD 3,000 or its equivalent per transaction.
/11 89

6- AD may sell Indian Rupees to foreign tourists / visitors against International Credit
Cards / International Debit Cards and take prompt steps to obtain reimbursement
07 51

through normal banking channels. While making payments in Indian Rupees to

resident customers towards purchase of foreign currency notes and/ or traveller’s
cheques, payment can be made in cash / by way of account payee cheque /demand
draft/ loading in INR debit cards/electronic funds transfer through banking channel,
as per prescribed limits(As per Income Tax guidelines ).

Encashment Certificate:
1- AD may issue certificate of encashment when asked for in cases of purchases of
foreign currency and travellers cheques from residents as well as non-residents..
2- In cases where encashment certificate is not issued, attention of the
customers should be drawn to the fact that unspent local currency held by
non-residents will be allowed to be converted into foreign currency only
against production of a valid encashment certificate.
Sales against Reconversion of Indian Currency:
AD Branches may convert into foreign currency, unspent Indian currency held by non-
residents at the time of their departure from India, provided a valid Encashment
Certificate is produced.
Note (1): AD branch may convert at their discretion, unspent Indian currency up to
Rs.10,000 in the possession of non-residents if, for bonafide reasons, the person is

International Banking Page 96

unable to produce an Encashment Certificate after ensuring that the departure is
scheduled to take place within the following seven days. Note
Note (2): AD Branch may provide facility for reconversion of Indian Rupees to the extent
of Rs.50,000/- to foreign tourists (not NRIs) against ATM Receipts based on the
following documents.
Valid Passport and VISA
Ticket confirmed for departure within 7 days.
Original ATM slip (to be verified with the original debit/ credit card).

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/11 89
07 51

SWIFT

SOCIETY FOR WORLDWIDE INTER BANK FINANCIAL

TELECOMMUNICATION

International Banking Page 97

 SWIFT

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07 51

SWIFT
In 1973, 239 banks from 15 countries got together to solve a common problem: how to communicate
about cross-border payments. The banks formed a cooperative utility, the Society for Worldwide
Interbank Financial Telecommunication, headquartered in Belgium. SWIFT went live with its
messaging services in 1977, replacing the Telex technology that was then in widespread use, and
rapidly became the reliable, trusted global partner for institutions all around the world. The main
components of the original services included a messaging platform, a computer system to validate

International Banking Page 98

and route messages, and a set of message standards. The standards were developed to allow for a
common understanding of the data across linguistic and systems boundaries and to permit the
seamless, automated transmission, receipt and processing of communications exchanged between
users.

- It is a co-operative society of International Banks founded in 1973 with

headquarters at Brussels , Belgium.
- It’s website is [Link]
- Besides Banks ,it has certain approved categories of non-bank Institutions
like security brokers / dealers, clearing/deposit institutions, exchange /
Traveller Cheque issuers etc. as it’s members.

There are different series to be used for different works in banks in SWIFT .
Briefly they can be described as under :

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Category of Messages Message Type Used For
Category 1 MT 101 TO 199 Customer payments and
cheques
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Category 2 MT 201 TO 299 Financial Institutions Transfer
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Category 3 MT 301 TO 399 Treasury Markets, Forex,
Money market & Derivatives
/11 89

Category 4 MT 401 TO 499 Collection and Cash letters

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Category 5 MT 501 TO 599 Securities Markets

Category 6 MT 601 TO 699 Treasury Markets

Category 7 MT 701 TO 799 Documentary Credits and

Guarantees
Category 8 MT 801 TO 899 Travellers Cheques

Category 9 MT 901 TO 999 Cash Management and

Customer Status

Some Important messages and their meaning

Sr No Message Type Meaning

1 MT 103 Inward and Outward
Remittance , Bank to

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 Customer and vice versa
2 MT 110 Draft Issuance
3 MT 111 Draft Cancellation
4 MT 192 Cancellation
5 MT 195 Queries
6 MT 196 Answers
7 MT 199 Free Format Message of
Series 1
8 MT 202 Bank to Bank Transfer
9 MT 295 Queries
10 MT 296 Answers
11 MT 299 Free Format Message of
Series 2

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12 Series 4 It is used for collection of
Bills and Cash letters
13 MT 400 Advice of Payment
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14 MT 412 Advice of Acceptance
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15 MT 420 Tracer
16 MT 450 Cash Letter Credit
Advice
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17 MT 456 Advice of Dishonour

17 MT 495 Queries
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18 MT 496 Answers
19 MT 499 Free Format Message of
Series 4
20 MT 900 Confirmation of Debit
21 MT 910 Confirmation of Credit
22 MT 940 Customer statement
Message
23 MT 950 Statement Message
24 MT 999 Free Format Message

Messages Related to Documentary Credit ( Series 7)

Sr No Message Type Meaning

1 MT 700 Issuance of Documentary
Credit
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2 MT 701 Annexure for the Issuance of
DC
3 MT 705 Pre Advice of DC
4 MT 707 Amendment of DC
5 MT 710 Advice of Third Bank DC
6 MT 711 Annexure of Advice of Third
Bank DC
7 MT 720 Issuance of Transferable DC
8 MT 721 Annexure for the issuance of
Transferable DC
9 MT 730 Acknowledgement
10 MT 732 Advice of Discharge
11 MT 734 Advice of Refusal

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12 MT 740 Authorization to Reimburse
13 MT 742 Reimbursement Claim
14 MT 747 Amendment to Authorization
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to Reimburse
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15 MT 750 Advice of Discrepancy
16 MT 752 Authorization to pay , accept
or Negotiate
/11 89

17 MT 754 Advice of Payment ,

acceptance or Negotiation
07 51

17 MT 756 Advice of Reimbursement or

Payment
18 MT 760 Issue of Guarantee
19 MT 767 Amendment of Guarantee
20 MT 768 Acknowledgement of
Guarantee
21 MT 799 Free Format Message of
Series 7

CENTRALIZATION OF DOMESTIC SWIFT OPERATIONS:

i. SWIFT creation/verification has been centralized at Trade Finance Centers, ISB and
Treasury Division for domestic operations and are also undertaken by overseas units.

International Banking Page 101

ii. All AD branches shall be allowed only inquiry into menu options from which SWIFT can
be created.

iii. Facility of authorization of SWIFT messages stands withdrawn from all SWIFT users in
branches.

iv. Branch shall have maximum two SWIFT users, to whom only inquiry will be allowed.

v. SWIFT alliance access shall be restricted to maximum two IPs per AD branch. CO/ZO to
ensure the same.

MESSAGE MANAGEMENT AND 3RD LEVEL RE-AUTHORIZATION:

i. SWIFT messages are now straight through processed from CBS/ITMS to SWIFT alliance.

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ii. It is to be ensured by TFCs, ISB, Treasury Division and all overseas offices that SWIFT
payment messages generated from CBS are verified in SWIFT application only when
appropriate accounting entries have been passed in CBS/ITMS/Finacle Treasury vis-à-vis
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the SWIFT message.
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iii. A Re-authorization team has been created at SWIFT Center Gurugram that would be
assigned with the task of re authorization of SWIFT messages relayed by Trade Finance
/11 89

Centers, ISB and Treasury Division. All officers working in SWIFT center as re-authorizers
shall be allowed restricted role for authorization only.
07 51

iv. All message types for domestic operations irrespective of type of currency will be parked
at SWIFT Gateway server which is under the control of SWIFT Team at SWIFT Center
Gurugram for Re-Authorization. The designated Officer at SWIFT Centre will cross check
the credentials of message in CBS/ITMS in duly verified stage, such as Amount, Account
number, purpose and other relevant information available in CBS/ITMS. It is to be ensured
before re-authorizing the message that necessary accounting entries have been passed in
CBS/ITMS system with respect to the SWIFT message.

v. All messages authorized by back offices of overseas units shall be re-authorized at front
office of the respective back offices by comparing details as mentioned in point IV above.
vi. Once the credentials are matched, the message will be Re-Authorized by SWIFT Center
Gurugram/Front office.

vii. In case of any mismatch, the concerned officer of SWIFT Team/Front office team will
record such variation and contact the concerned office for rectification of such message.
The message will invariably be rejected and returned to concern office. The rejection will be
intimated to the office through email.

International Banking Page 102

viii. The rejected message at SWIFT Alliance Access Server would move to modification
queue and the user, who created the message, will have the access to the message to
modify and resend to SWIFT Team at Treasury Mumbai/front office. Please note that the
Sender Reference Number ,Bank Operations Code, Foreign Currency, Foreign Currency
Amount, Instructed Amount, Instructed Currency are non-modifiable in case of rejected
messages.

ix. The SWIFT Team at SWIFT Center Gurugram/front office who has been assigned the
task of re-authorization of SWIFT messages, is not required to carry out FEMA check.
Responsibility of FEMA check will rest with users at TFCs/ back office.

x. Officers working at SWIFT Center Gurugram on SWIFT Servers, having Administrator

privilege, shall not carry out any operational role such as Creation, Modification, Verification,
Authorization including Re- Authorization of SWIFT messages etc. SWIFT In-charge at
Gurugram to ensure that no officer is given Administrator privilege except those working on
SWIFT server (role) invariably. SWIFT Center Gurugram to keep Administrator privilege

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right reports on record for cross checking by the auditors. Concurrent auditors to ensure the
same.
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xi. Concurrent auditor at SWIFT center- Gurugram, shall audit the Operations of SWIFT
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Center Gurugram i.e. user based management, reconciliation, system management, vendor
visit register maintenance, data backup, logs of privilege users, auto printing etc.
/11 89

xii. Overseas offices at Hong Kong, Dubai and London to ensure that SWIFT messages
generated by their back offices are re-authorized at the front offices. Bhutan to get
messages re-authorized at their corporate office.
07 51

xiii. It is advised to all SWIFT enabled offices that usage of unstructured SWIFT messages
be reduced to absolute minimum

USER BASED LIMIT FOR VERIFYING/AUTHORIZING/RE-AUTHORIZING SWIFT

MESSAGE IRRESPECTIVE OF CURRENCY
TABLE-A
SWIFT Message Verification & Authorization

International Banking Page 103

Scale Domestic Operations Overseas units (PNB HK
and Dubai)

Scale-I 15000 0-35000

Scale-II 35000 35001-250000
Scale-III 100000 250001-600000
Scale –IV & Above Full Powers Full Powers

User base limit shall be applicable to outward messages only and all type of message
where the value based transactions can be quantified

The role of user(s) in CBS/Swift will be as under

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TABLE-B
Branch/TFC/ISB/Overseas back office SWIFT Center/
front office of
22 1 overseas units

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System CBS/ITMS/FT SWIFT SWIFT
/11 89

Type of User P-1 P-2 P-3 P-4

Role of User Maker Checker Verifier/Authorizer Re Authorizer

07 51

Minimum work Clerical Scale I Scale I Scale I

Class of user
As per powers defined in Table
Above

ii. It is to be ensured by all offices domestic as well as overseas that user

1compartmentalization between users of SWIFT and CBS/ITMS/Finacle Treasury as per
table above

iii. As per “Table B” above, separation has been created between the users in CBS and
SWIFT. New profile has been defined for CBS users as “SW” who have access to SWIFT
alliance for verification/authorization. Under the new profile, the user in CBS who
enters/passes/authorizes the transactions in CBS is restricted to verify/authorize SWIFT
messages in SWIFT application.

iv. The new role profiles have been defined in CBS for both domestic and overseas offices’
users having creation/verification rights in CBS, these users would be assigned “GU/FB”
role in CBS and only inquiry in SWIFT application would be allowed to these users. The

International Banking Page 104

user having access to SWIFT application for verification/Authorization must be assigned
only “SW” role in CBS.

v. The power to change the role profile in CBS for domestic users, having SWIFT user
rights, from “SW” to “GU”/“FB”, rests with Central Help Desk only.

vi. The power to change role profile in CBS from “GU/FB” to “SW” shall continue to rest
with Circle Help Desk/Zonal Help Desk/Central Help Desk.

vii. Change in CBS role profile of overseas units shall be done by the overseas desk at HO:
ITD.

viii. The user based compartmentalization shall apply to all domestic as well as overseas
units.

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ix. All branches/offices to ensure that the users entering and verifying the transactions in
CBS are different from those authorizing the SWIFT messages in SWIFT alliance.
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x. All officers working in SWIFT Center Gurugram as re-authorizers shall be allowed
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operations restricted to authorization only. They shall not be allowed creation of SWIFT
messages either in CBS or SWIFT.
/11 89

USER MANAGEMENT
07 51

i. All SWIFT enabled offices including overseas offices are advised to submit Application
for Swift Access as per Annexure-D, duly filled in and approved by Branch
Head/Divisional Head, as the case may be, for new user creation/password Reset/ user
transfer/user disabling, to SWIFT Center Gurugram via email at swift@[Link].

ii. While sending any request for role change of swift users from ‘Search / Enquiry’ to
‘Authorizer’, the recommending official (not below the rank of Scale IV) should confirm on
the authorization form that the CBS/Finacle role profile of the said user is either “SW” or
has been changed to “SW”.

iii. Similar confirmation should be incorporated on the password reset form by the
recommending official in cases where the password of an existing Authorizer is sought to be
reset.

iv. SWIFT Center Gurugram to specifically ensure that suitable confirmation on the
password reset form / user profile change form (change to authorizer) is incorporated before
they undertake the change.

International Banking Page 105

v. SWIFT Center Gurugram to ensure that role profile in SWIFT is set as per the profile in
CBS, on receipt of application for change in SWIFT role profile.

vi. Change of user profile to Authorizer should not be done on the same day for users
whose CBS profile is changed from GU to SW on that day itself.

vii. SWIFT Center Gurugram, while entertaining such requests shall ensure that request for
new user creation/password Reset/ user transfer/user disabling is duly signed by an officer
in scale IV and above. The new password shall be communicated to the user at the
registered corporate email id only.

viii. SWIFT Center Gurugram to take out print of list of all USERS on daily basis and
authorization of SWIFT User IDs/Resetting of Password on weekly basis. Records of these
authorization/approvals shall be signed by two authorized officers accorded approval at
SWIFT Center Gurugramand checked & counter signed by Concurrent Auditor. The report
shall be kept for external audit.

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ix. TFCs, ISB, Treasury Division and Overseas units to carry out review of access rights of
active SWIFT users on monthly basis. It is to be ensured that users having authorization
22 1
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rights in SWIFT alliance shall not have any operational role in CBS/ITMS/FT i.e.
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creation/verification rights.

x. SWIFT team shall analyze frequent resetting of passwords by any user for any anomaly.
/11 89

xi. Further, SWIFT Center Gurugram to download list of SWIFT users who have not logged
in last five days on daily basis and ensure that the identified users are disabled immediately.
07 51

xii. Two factor authentication (2FA): SWIFT user while logging in to SWIFT will get OTP
to have access to SWIFT. Only after entering OTP received on his/her registered mobile.
SWIFT team at Gurugram shall guide the User for installation of OTP based Mobile
application for 2FA and its operation. The USER is required to install an Application (Free
OTP) from play store on his or her Android or IOS mobile to get the OTP while logging in to
SWIFT Application. In case any difficulty, SWIFT team shall assist in redressing any such
issue.

xiii. The Circle Head/Incumbent in charge at TFC, ISB/Overseas offices and divisional head
Treasury shall ensure deactivation of SWIFT User IDs of official within the Circle / office
immediately upon his/her transfer/suspension/ superannuation/promotion. It is to be
ensured that necessary requests are placed in this regard for deactivation to SWIFT Center
Gurugram through fastest means of communication. A confirmation to this effect must be
obtained from SWIFT Center Gurugram and held on record.

RECONCILIATION OF SWIFT MESSAGES WITH CBS

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i. Reconciliation of SWIFT messages is to be carried out with entries passed in CBS on two
hourly basis. Reports have been customized in CBS to facilitate reconciliation of SWIFT
messages with CBS.

ii. Date wise Auto generated reports of the CBS are available in Morning checking folder
with solid as ‘000000’-> Morning Checking Reports-> Swift reports. These reports are
available after every two hours say 08.00AM, 10.00 AM, 12.00 noon, 02.00 PM and so on
for domestic operations. Overseas units to draw reports from CBS using the URL provided
by HO: ITD.

iii. Swift reports can be generated by logging to Swift server-> Click on Message search ->
Enter the search criteria and click on Search ->Click on Export and select the export criteria.
Then click on OK.

iv. Trade Finance Centers, ISB, Treasury Division and the overseas units shall carry out
reconciliation of outward SWIFT messages with entries passed in CBS on two hourly basis.

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v. Trade Finance Centers, ISB, Treasury Division, PNB Hong Kong, PNB Dubai, DRUK
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PNB and PNB IL shall submit a monthly reconciliation certificate to HO:IBD on the format
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prescribed in Appendix A (TFC and ISB), Appendix B (London, Bhutan, Dubai and
Hong Kong) and Appendix C (Treasury Division).
/11 89

vi. Concurrent auditor at TFCs, ISB, Treasury Division and overseas offices/branches shall
ensure that all SWIFT outward messages are reconciled with CBS independently by
drawing reports from CBS/ITMS and SWIFT.
07 51

vii. Concurrent Auditor at TFCs are advised to ensure that along with the SWIFT log
reconciliations of all Financial and Non-Financial SWIFT messages with CBS, all
transactions/messages/files related to SWIFT having implications on the exposure of the
bank both FUND based and NON-FUND based are reconciled with corresponding LIMIT set
as well as entry passed in the CBS/accounting system of the bank on daily basis invariably.
CUSTOMER ID wise report no. DAYRPT_10_93 has been customized in CBS to facilitate
field functionaries.

TIMINGS FOR SWIFT OPERATIONS

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SWIFT Center Gurugram to ensure Switching off of LTE (Line Terminal Equipment) i.e.
SWIFT server at 10:00 PM daily. Further, in order to comply with RBI guidelines, SWIFT
Center Gurugram to restrict SWIFT creation, verification & authorization time for TFCs and
ISB at 7:00 PM and overseas units at 10:00PM. In case of exigencies, concerned offices
may request SWIFT Center Gurugram through duly signed letter by AGM/DGM scanned
and send on email to SWIFT Center Gurugram, giving proper justification for inordinate
delay, which shall be considered as special case by the SWIFT Center Gurugram for
extension of the time. SWIFT Center Gurugram shall keep record of such permission for
audit.

World Travel Card (WTC)

(FOREIGN EXCHANGE CIRCULAR No 48/2020 )

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WHO CAN HAVE WTC Indian Nationals Visiting Abroad ( Except Nepal and Bhutan) for any
purpose permitted by Reserve Bank Of India

CURRENCY 22 1
WTC can be issued in 3 Currencies that is USD , EURO and GBP

08
/20 57
How to Get It can be get issued by all the Authorized Branches as well as
designated Branches for WTC
/11 89

Transaction Limit USD 1000 , EURO 800 , GBP 500 per Day

Minimum and Maximum There is no minimum amount of loading is prescribed by the Bank.
07 51

Reloading Maximum amount of re-loading by any resident individual is USD

2,50,000 or equivalent to USD 2,50,000 (LRS) for any financial year
(April to March)

Precautions Card may be issued against cash for an amount below INR 50000/-.
For non customers, WTC for an amount equivalent of INR 50000/- or
above, can be issued by accepting Cheque/ NEFT / RTGS only

Surrender Of Balance Residents Indians who purchases a prepaid card are permitted refund
of the unutilized foreign exchange balance only after 10 days from the
date of last transaction

CHARGES Issuance/Recharge - Rs.100+ Applicable Taxes Duplicate PIN-

Rs.100+ Applicable Taxes Replacement of Card-Rs.100+ Applicable
Taxes (if
delivered in India)
USD 20.00 for delivery abroad

Application APPLICATION FORM FOR ISSUE OF PNB WORLD TRAVEL CARD

is given in Annexure-IV of IBD Circular 48/2020

OTHER IMPORTANT POINTS Expiry Date is already Embossed in the form of mm/yy which is to be
taken care of while issuing the card

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Documents required for 1. Application form ( Annexure-IV given at IBD Foreign Exchange
issue of WTC Circular No. 12 /2017)
2. Copy of valid passport
3. Copy of VISA
4. Latest photograph of the customer (For Walk-in-
Customer) and
5. Form A- 2 if currency sold exceeds USD 25000 or
equivalent (in other currencies).
6. It is to ensure that the PNB World Travel Card (WTC) are
issued to PAN card holders only so that proper transactions
along with the detail of PAN card of the individual may be
furnished to RBI for ensuring Regulatory compliance under
LRS.

a) Authorized branches for WTC to move the application containing the credential of the
customer to ISB: Delhi over email for checking the history of remittances of the customer for

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that particular financial year in order to ensure that the transaction is well within the overall
LRS limit of USD 2,50,000 (Annexure-I).
b) On receiving the request from branches, ISB: Delhi to check the history of transaction of
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the remitter from RBI’s XBRL website and send the screen shot/excel file of the detailed
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information available in XBRL to the concerned Branch through email.
c) As per the detailed information received from ISB: Delhi, the concerned branch will
issue/load/re-load the WTC, only after ensuring that the total limit of USD 2,50,000 has not
/11 89

breached (inclusive of current transaction).

d) This is to be ensured that the PNB World Travel Card (WTC) are issued to PAN card holders
07 51

only so that proper transactions along with the detail of PAN card of the individual may be
furnished to RBI for ensuring Regulatory compliance under LRS.

In order to safeguard the customers’ interest, our Division has taken insurance coverage
from M/s New India Assurance Co. Ltd .for World Travel Card Customers with added
features.

A. Scope of Coverage:
1. The cover is available for all active World Travel Card of the Bank.
2. To indemnify PNB / card holder, against financial loss sustained by the PNB World Travel
Card Holder due to disputed transactions arising out of fraudulent utilization of any lost,
stolen, cloned, duplicated, Counterfeited, skimmed cards used on EDC/ POS terminals and
ATMs/ E- commerce or through Internet Banking during defined period.
3. To indemnify cases wherein the fraudsters manipulated the ATM machine and later on
made unauthorized transactions resulting into loss to genuine card holder.
4. To indemnify the cases where fraudster was present in the ATM Cabin in the pretext of
extending help to genuine cardholders and fraudulently exchanging the card and makes
unauthorized transactions resulting into loss to genuine card holder.
5. To indemnify cases of vishing upto a maximum of INR 20 lacs, (subject to the maximum of
per card sum insured) wherein the senior official of bank (DGM/GM/Circle head /Zonal
International Banking Page 109
Manager) certifies to the insurance company about the genuineness of the case.
6. To indemnify a maximum of 10 cases for up to an additional limit of INR 1 lac wherein total
loss amount on the card exceeds the base sum insured of INR 3.5 lacs.
7. To indemnify all cases, wherein RBI/Ombudsman/any other authority/ advisory asking
PNB to settle the fraud claim to the customer. S
8. The insurance company shall also indemnify cases where the cardholder has lost the
baggage, lost passport and/or other important documents and delay of baggage in case of
international travel. Insurance cover for Active World Travel Card (WTC) holders Policy
period: 27.05.2021 to 26.05.2022
Geographical Limit: Worldwide except India, Bhutan and Nepal.
Limit of insurance cover per Card: 3.50 lakhs

(For Details of Insurance Coverage Kindly refer to FOREIGN EXCHANGE CIRCULAR No.
78/2021)

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Notional Rates / Full Fledged Money Changers (FFMC)
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(FOREIGN EXCHANGE CIRCULAR NO.67/2022)
In view of the present currency movements in the market, it has been decided to revise
Notional Rates for the following currencies.
/11 89

(In Rupees)
Unit of currency Currency Notional Rate
Existing (w.e.f. Revised (w.e.f
07 51

15.07.2022) 12.10.2022)
1 USD 79 82
1 GBP 97 91
1 EURO 81 81
1 AUD 53 53
1 CAD 59 59
100 JPY 59 57
1 SGD 57 57

Full Fledged Money Changers (FFMCs)

( IBD:FOREIGN EXCHANGE 06/2022)

Following valid FFMCs are empanelled by the Bank for handling foreign currency exchange
activities.

S. No Name of Sanction Valid Up

FFMC to

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 1 M/S Orient Exchange & Financial Services Pvt Ltd 21.06.2022

2 M/S Quick Forex Limited 21.06.2022

3 M/S FRR Forex Pvt Ltd 21.06.2022

4 M/S Ebixcash World Money Limited 02.07.2022

5 M/S R R Sen & Bros (P) Ltd 02.07.2022

6 M/S Honest Deal Forex Limited 02.07.2022

7 M/S Wall Street Finance Ltd 25.01.2023

8 M/S Transcorp International Ltd 25.01.2023

9 M/S Zenith Leisure Holidays Ltd 25.01.2023

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10 M/S BFC Forex & Financial Services Pvt Limited 25.01.2023

11 22 1
M/S World One India Forex Pvt Ltd 25.01.2023

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12 M/S Paul Merchants Ltd 01.02.2023

13 M/S FCM Travel Solutions India Pvt Ltd 01.02.2023

/11 89
07 51

RUPEE DRAWING ARRANGEMENTS (RDA)

Rupee Drawing Arrangement (RDA) is a channel to receive cross-border remittances

from overseas jurisdictions. The Reserve Bank of India (RBI) has allowed AD Banks in
India to open and maintain Rupee Vostro accounts of Nonresident Exchange Houses
from Gulf countries, Hong Kong, Singapore, Malaysia and all other countries which are
FATF compliant. In case of Malaysia & other FATF compliant countries, this is
permissible only under Speed Remittance procedure.

Nodal Branch for RDAs:

International Service Branch, Sol ID 4553 K-16, Connaught Circus, New
Delhi 110001 (ISB-ND)
Contact Nos. : 011- 43592845, 43592846, and 43592847
Email id: isb_speed@[Link]; isb_rda@[Link] Fax Nos. : 011-
43592845, 23416089, 23416091, 23416092

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Types of Rupee Drawing Arrangements and Collateral Cover: Rupee Drawing
Arrangements can be conducted under the Designated Depository Agency (DDA), Non-
Designated Depository Agency (Non-DDA) and Speed Remittance procedures

Permitted Transactions
a) Donations / contributions to charitable institutions will be routed through the xchange
Houses.
b) The following is the list of permissible transactions under Drawing Arrangements with
Exchange Houses:
I. Credit to Non-resident (External) Rupee accounts maintained by Non- Resident
Indians in Indian Rupees.
II. Payments to families of Non-resident Indians.
III. Payments in favour of Insurance companies, Mutual Funds and the

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Post Master for premia / investments.
IV. Payments in favour of bankers for investments in shares, debentures.
V. Payment to Co-operative Housing Societies, Government Housing Schemes or
Estate Developers for acquisition of residential flats in India in individual names, subject
22 1
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to compliance of regulations applicable thereof, by the Non-resident Indians.
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VI. Payments of tuition/ boarding, examination fee, etc., to schools, colleges and other
educational institutions.
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VII. Payments to medical institutions and hospitals in India, for medical treatment of
NRIs / their dependents and nationals of all FATF countries.
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VIII. Payments to hotels by nationals of all FATF compliant countries / NRIs for their
stay.
IX. Payments to travel agents for booking of passages of NRIs and their families
residing in India towards their travel in India by domestic airlines / rail, etc
X. Trade transactions up to Rs.15,00,000 (Rupees Fifteen lakhs only) per
transaction.
XI. Payments to utility service providers in India, for services such as water supply,
electricity supply, telephone (except for mobile topups), internet, television, etc.
XII. Tax payments in India
XIII. EMI payments in India to Banks and Non-Banking Financial Companies (NBFCs)
for repayment of loans.
XIV. Remittances to the Prime Minister’s National Relief Fund (PMNRF)/Chief Minister’s
Distress Relief Fund- Kerala subject to the condition that the remittances are directly
credited to the Fund by the banks and the banks maintain full details of the remitters.
Our Bank is designated as a collection bank of PMNRF and our Parliament Street,
New Delhi Branch (Dist. No. 0153) is maintaining their account No.
0153000100909701.

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 :23
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/11 89

Foreign Contribution Regulation Act (FCRA)

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The Foreign Contribution (Regulation) Act, 1976 was enacted in the year 1976. The Act has
now been replaced by the Foreign Contribution (Regulation) Act, 2010 (the Act) which
came into effect from May 1, 2011 with the prime objective to regulate the acceptance and
utilization of foreign contribution (FC) or foreign hospitality (FH) by certain individuals or
associations or companies and to prohibit acceptance and utilization of foreign contribution
or foreign hospitality for any activities detrimental to the national interest and for matters
connected therewith or incidental thereto. (Ministry of Home Affairs (MHA) has published
a Gazette Notification S.O. 909(E) dated 29th April, 2011 to enact the Foreign Contribution
(Regulation) Act, 2010 (42 of 2010) published by Ministry of Law & Justice)

The Foreign Contribution (Regulation) Rules, 2011 (the Rules) also came into force
simultaneously with the Act. (MHA has published a Gazette Notification G.S.R. 349(E)
dated 29th April, 2011)

Foreign Contribution (FC) means the donation, delivery or transfer made by any foreign
source, either directly or through one or more persons –

i. of any article, not being given to a person* as a gift for his personal
use, whose market value in India on the date of such gift is not
more than Rs. 25,000/-

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 ii. of any currency, whether Indian or foreign;

iii. of any security including foreign security, as defined in the

Securities Contracts(Regulation) Act, 1956 and the Foreign
Exchange Management Act, 1999.

Explanation 1: Interest accrued on foreign contribution deposited in any bank or any other
income derived from the foreign contribution or interest thereon shall also be deemed to be
“Foreign Contribution”.

Explanation 2: Any amount received, by an person from any foreign source in India, by way
of fee (including fees charged by an educational institution in India from foreign student) or
towards cost in lieu of goods or services rendered by such person in the ordinary course of
his business, trade or commerce whether within India or outside India or any contribution
received from an agent or a foreign source towards such fee or cost shall be excluded from
the definition of foreign contribution.

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* In terms of FCRA, 2010 "person" includes –
i. an individual;
ii. a Hindu undivided family; 22 1
iii. an association;
08
/20 57
iv. a company registered under section 25 of the Companies Act, 1956 (now Section 8 of
Companies Act, 2013).
/11 89

Association – means an association of individuals, whether incorporated or not, having

an office in India and includes a society, whether registered under the societies
07 51

registration Act, 1860, or, not and any other organization, by whatever name called.

Certificate – means certificate of registration granted under subsection (3) of section 12

of the FCRA 2010 Act. The term Foreign Source covers foreign governments and its
agencies, any international agencies (other than certain specified agencies such as
United Nations, World Bank, etc.), foreign citizens, foreign companies and foreign
corporations, entities such as trade unions, trusts, societies, clubs, etc. formed or
registered outside India.

Foreign company – means any company or association or body of individuals incorporated

outside India and includes-
i. a foreign company within the meaning of section 591 of the companies act, 1956;
ii. a company which is subsidiary of foreign company
iii. The registered office or principal place of business of a foreign company.
iv. A multinational corporation.

Foreign Hospitality means any offer, not being a purely casual one, made in cash or
kind by a foreign source for providing a person with the cost of travel to any foreign
country or territory or with free boarding, lodging, transport or medical treatment.

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The Act and the Rules shall be read with Foreign Contribution (Regulation)
Amendment Rules, 2012 published by MHA through Gazette Notification G.S.R. 292(E)
dated 12th April, 2012 and with Foreign Contribution (Regulation) Amendment Rules,
2015 published by MHA through Gazette Notification G.S.R. (E) dated 14 th December,
2015.

GUIDELINES

FCRA, 2010 provides that any individual, HUF, association or a company registered under
Section 25 of Companies Act 1956 (Now Section 8 of Companies Act, 2013) can receive
foreign contribution subject to following conditions:-

i. It must have a definite cultural, economic, educational, religious or social programme.

ii. It must obtain the FCRA registration/prior permission from the Central Government.

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iii. It must not be prohibited under Section 3 of FCRA, 2010.

The Act also restricts certain classes of persons from accepting foreign hospitality while
22 1
visiting any country or territory outside India, without the prior permission of the Central

08
Government. Further, under the Act, the Central Government is empowered to prohibit
/20 57
any person or organization not specified in the Act from accepting any foreign
contribution and to require any person or class of persons, not specified in it to obtain
/11 89

prior permission of the Central Government before accepting any foreign hospitality.

SALIENT FEATURES OF THE FCRA, 2010

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A. As per FCRA, 2010, the provisions of the act shall apply to:
i. Whole of India
ii. Citizens of India outside India; and
iii. Associate Branches or subsidiaries, outside India, of companies or bodies corporate,
registered or incorporated in India

B. There are two modes of obtaining permission to accept foreign contribution according to
FCRA, 2010:
i. Registration
ii. Prior Permission

C. Associations which were granted prior permission or registration under the repealed
FCRA, 1976 will continue to be eligible under FCRA, 2010 as under:
i. Registration granted under FCRA, 1976 shall remain valid for a period of 5 years from 1st
May, 2011.
ii. Prior permission granted under FCRA, 1976 shall remains valid till receipt and full
utilization of the amount of foreign contribution for which the permission was granted.

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D. Every certificate or registration granted under the Act shall be valid for a period of five
years from the date of its issue and the prior permission shall be valid for the specific
purpose or specific amount of foreign contribution proposed to be received.

E. Every person/association registered under FCRA should apply for renewal of its
registration six months before the date of expiry of the certificate of registration.

RULES UNDER FCRA-2010 IN RELATION TO BANKING

A. Maintenance of Accounts: The Act stipulates that every person who has been granted
a certificate of registration/prior permission as stipulated in the Act shall receive foreign
contribution in a single account and only through such one of the branches of a bank as
may be specified in his/her application for grant of certificate. Such person may open one or
more accounts in one or more banks for utilizing the foreign contribution received by him.
However, the Act strictly prohibits the receipt or deposit of any other funds (other than
foreign contribution) in such accounts.

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B. Utilization of foreign contribution: The Act mandates that the foreign contribution shall
be utilized only for the purposes for which the contribution has been received provided that
22 1
no foreign contribution or any income arising out of it can be used for speculative purposes.

08
The Act has also restricted the use of foreign contribution to an extent not exceeding 50%
/20 57
for defraying administrative expenses.

C. Reporting by Banks of receipt of foreign contribution: The bank shall report to the
/11 89

Central Government within 48 hours of any transaction in respect of receipt or utilization of

any foreign contribution by any person whether or not such person is registered or granted
07 51

prior permission under the Act. Reporting by Banks is also applicable to transfer of funds
from one FCRA registered Association to another. The bank has been integrated with
Public Financial Management System (PFMS) for a higher level of transparency and hassle
free reporting compliance.

D. Transfer of foreign contribution: A person who has been granted a certificate of

registration or prior permission under the Act shall follow the following procedure for transfer
of foreign contribution received by him:
i. Seek prior approval of the Central Government for transferring foreign contribution to an
extent not exceeding 10% of the total value of the foreign contribution received by him
during the financial year, to a person who has not been granted a certificate of registration
or prior permission under the Act.
ii. No prior approval of the Central Government is required for transferring foreign
contribution to a person who has been granted a certificate of registration or prior
permission under the Act provided that the recipient has not been proceeded against under
the Act.
iii. Both the transferor and the recipient shall be responsible for ensuring proper utilization of
the foreign contribution so transferred.

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E. Suspension of Certificate of Registration: In case of suspension of certificate of
registration, the unspent amount can be utilized as under:
i. 25% may be spent with the prior approval of the Central Government.
ii. 75% shall be utilized only after revocation of suspension of the certificate of registration.

F. Cancellation of Certificate of Registration: The unutilized foreign contribution shall

vest with the concerned Bank till the Central Government issues further directions in the
matter. In case a person whose certificate of registration has been cancelled transfers/ has
transferred the foreign contribution to any other person, the above condition would apply to
the person to whom the funds has been transferred.

G. Any information or intimation about political or speculative activities of a person shall be

sent by registered post to the Secretary to the Government of India in the Ministry of Home
Affairs, New Delhi.

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FOREIGN CONTRIBUTION (REGULATION) AMENDMENT ACT, 2020
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The Parliament amended the FCRA, 2010 in September, 2020. One of the major
amendments mandates compulsory opening of an FCRA account in the State Bank of India
(SBI), Main Branch located at Sansad Marg, New Delhi by each NGO/association registered
/11 89

or given prior permission under FCRA 2010. Each existing FCRA registration holder as well
as new applicant for registration or for prior permission would also have to comply with the
same. This “FCRA account” of the NGO would be the first exclusive port of receipt of its FC
07 51

in India.

The amended Section 17 of the FCRA, 2010 provides as under:- “17. (1) Every person who
has been granted certificate or prior permission under section 12 shall receive foreign
contribution only in an account designated as "FCRA Account" by the bank, which shall be
opened by him for the purpose of remittances of foreign contribution in such branch of the
State Bank of India at New Delhi, as the Central Government may, by notification, specify in
this behalf:

Provided that such person may also open another ‘‘FCRA Account’’ in any of the scheduled
bank of his choice for the purpose of keeping or utilising the foreign contribution which has
been received from his ‘‘FCRA Account’’ in the specified branch of State Bank of India at
New Delhi:
Provided further that such person may also open one or more accounts in one or more
scheduled banks of his choice to which he may transfer for utilising any foreign contribution
received by him in his ‘‘FCRA Account’’ in the specified branch of the State Bank of India at
New Delhi or kept by him in another ‘‘FCRA Account’’ in a scheduled bank of his choice:
Provided also that no funds other than foreign contribution shall be received or deposited in
any such account.

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(2) The specified branch of the State Bank of India at New Delhi or the branch of the
scheduled bank where the person referred to in subsection (1) has opened his foreign
contribution account or the authorised person in foreign exchange, shall report to such
authority as may be specified,— (a) the prescribed amount of foreign remittance; (b) the
source and manner in which the foreign remittance was received; and (c) other particulars,
in such form and manner as may be prescribed.”

The bank shall report to the Central Government within forty-eight hours any transaction in
respect of receipt or utilization of any foreign contribution by any person.

Foreign Contribution shall be received for the first time in India only in an account opened in
the SBI, Main Branch, Sansad Marg, New Delhi. However, the NGO/association can open
another FCRA account in any PFMS branch of a scheduled bank of its choice anywhere in
the country and also, if it so decides, open as many FCRA utilization accounts in bank

:23
branches of its choice as it decides. The authorities of SBI, Main Branch, Sansad Marg, New
Delhi shall transfer any foreign contribution received by any NGO/association to their other
FCRA account or utilization account or both of them as per the choice/decision of that
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NGO/association.
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To comply with the revised FCRA guidelines-:
/11 89

1. As per revised guidelines designated FCRA account meant for receiving foreign
contribution from foreign source can only be opened with SBI, main branch, New Delhi
(SBIN0000691). However, FCRA utilization account can be maintained with any of PFMS
07 51

enabled scheduled commercial bank.

2. Existing FCRA accounts with other banks may be continued as another FCRA account
only for the purpose of keeping or utilizing foreign contribution received through SBI main
branch.
3. Foreign contribution utilization accounts maintained with our bank need to be linked with
designated FCRA account with SBI, Main Branch, New Delhi. Accordingly, customers are to
be advised to submit details of such designated FCRA account opened with SBI along with
documents related to Registration/prior permission given by MHA.
4. Branches to ensure that all related documents are held on record and transaction shall be
permitted after ensuring all the due diligence.
5. Foreign contribution utilization account shall be opened in identified scheme codes only as
under: - Saving Accounts : SBFCR - Current accounts: CAFCR - Term Deposits: FDFCR
6. No credit (including cash) in FCRA accounts is permitted except remittances received
from designated Foreign contribution account of beneficiary with SBI, New Delhi Main
Branch and other specific credit allowed under regulations. Illustrative (but not exhaustive)
list of such specific credit is as under:
- All interest that accrues on Foreign contribution (FC) received in any bank account
including interest on FDs.
- Any income generated in India from assets created by spending the funds from FC. This

International Banking Page 118

includes proceeds from sales of such assets which have been credited even partly by
spending the FC.
- Proceeds from sale of FC received in kind or in the form of securities.
- Re-depositing the unutilized FC which might have been drawn out as advance for any
purpose by the NGO/association. Such a re-deposit, however, must be backed by matching
withdrawal entries and relevant records to establish that it was unutilized/unspent FC
amount. This would include any refund received on account of cancellation of any
services/tickets etc. sought to be taken by utilizing FC.
7. Foreign contribution received in Nostro / Vostro accounts of our bank are not permitted to
be credited in FCRA accounts.
8. Details of Registration/prior permission given by MHA shall be correctly entered in the
CBS and be updated from time to time

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Forward Contracts
(IBD: Foreign Exchange Circular No 44/2021)
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Forward Exchange Contract is an agreement between the Bank and the Customer
whereby the Bank agrees to buy/sell foreign exchange at a future date, at a firm
rate fixed on the date of the contract. It is a firm commitment wherein the
/11 89

exchange rate, amount, currency, the date/period of delivery and mode of delivery
are agreed between the Bank and the Customer at the time of entering into the
Contract. It is obligatory on the part of customer to fulfill his commitment within
07 51

the period stipulated under the Contract.

NEED OF FORWARD CONTRACT:

The need for a Forward Contract arises due to fluctuations in Exchange Rates of
foreign currencies. With the advent of the floating exchange rate of most
currencies, the incidence of erratic exchange rates movement is more than ever
before. By entering into a forward Contract, an exporter can fix the realisable value
in rupees for a foreign currency so that he is assured of a reasonable profit.
Similarly, an importer can fix the amount payable in rupees for imports in foreign
currency thus avoiding cost escalation due to exchange fluctuation. The exporter
would approach the Bank for the issue of Forward Purchase Contract whereas the
importer would approach the Bank for the issue of a Forward Sale Contract in
respect of his import commitments.

ELIGIBILITY:
AD Branches handling import and export business receive requests from their
importer and exporter customers for booking forward contract in various
currencies to cover the exchange rate fluctuation risks for the payment to be
International Banking Page 119
made/ received at a future date. Forward contracts for customers are booked in
respect of genuine trade transactions and not for speculative purposes. These
contracts are subject to exchange control regulations provided under FEMA Act
1999 from time to time.

FACILITIES FOR PERSONS RESIDENTS IN INDIA OTHER THAN AUTHORISED DEALERS

CATEGORY-I AND FOR PERSONS RESIDENT OUTSIDE INDIA:

Definitions:

Anticipated exposure – An exposure to the exchange rate of INR against a foreign currency on
account of current and capital account transactions permissible under FEMA, 1999 or any rules
or regulations made thereunder, which are expected to be entered into in future.
Contracted exposure – An exposure to the exchange rate of INR against a foreign currency on
account of current and capital account transactions permissible under FEMA, 1999 or any rules
or regulations made thereunder, which have already been entered into.

:23
For the purpose of Anticipated and Contracted exposures, the term exposure would also include
those arising out of transactions between residents that are denominated in a foreign currency
but settled in INR or are linked to a foreign currency or are linked to a benchmark denominated
22 1
08
in foreign currency.
/20 57
Hedging – The activity of undertaking a derivative contract to offset the impact of an anticipated
or a contracted exposure.
/11 89

User – Any person as defined under para 2 (u) of FEMA, 1999 whether resident in India or
resident outside India.
07 51

A Covered call (put) option means a written option where the writer has a long (short) position in
the asset underlying the option.

Net worth shall have the same meaning as defined in Section 2(57) of the Companies Act, 2013
(as amended).

Non-deliverable derivative contract (NDDC) means a foreign exchange derivative contract

involving the Rupee, entered into with a person resident outside India and which is settled
without involving delivery of the Rupee.

USER CLASSIFICATION FRAMEWORK: RBI regulations provide for Classification of Users

into Retail and Non-Retail, and therefore the permissibility of products for each set of users
applies. The brief User classification criteria defined in regulation are as under:
i. Authorised Dealer-Branch/Treasury will classify its clients as either a retail user or non-
retail user as per the eligibility criteria given in the RBI regulations. As per the RBI
regulations, the following users shall be eligible to be classified as NONRETAIL USERS:
a. All entities regulated by a financial sector regulator subject to general or special
permission of the concerned regulator.
b. Exim Bank, National Bank of Agriculture and Rural Development (NABARD), National
Housing Bank (NHB) and Small Industries Development Bank of India (SIDBI).
c. Companies with a minimum net worth of ₹500 crores.

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d. Person’s resident outside India other than individuals.

ii. Any user who is not eligible to be classified as a non-retail user shall be classified as a
retail user.
iii. Any user who is otherwise eligible to be classified as a non-retail user shall have the
option to get classified as a retail user.
iv. User classification would apply to all derivatives including contracts not involving INR and
Non-deliverable derivative contracts.
v. GUIDELINES APPLICABLE TO RETAIL USERS AS RBI REGULATION:
a) Eligible products – Forwards, purchase of call and put options, (Only European options)
purchase of call and put spreads, swaps. Treasury Division, Mumbai to list out the products
available to customer within the eligible products permitted by RBI.
b) All forward contracts with retail clients shall be executed at the ongoing interbank/market
rates and shall be time stamped. For all other derivative contracts, the mid-market mark of
the derivative shall be disclosed to the client before entering into the contract and the same

:23
must be included in the term sheet. Mid-market mark of a derivative is the price of the
derivative that is free from profit, credit reserve, hedging, funding, liquidity, or any other costs
or adjustments. Other derivative products, shall be handled by Treasury Division only and
22 1
08
regulatory compliance for such products will be ensured by them.
/20 57
c) All applicable fees/commissions/service charges etc. related to the contract shall be
charged by the authorised dealer separately and shall not be part of the price of the contract.
/11 89

vi. GUIDELINES APPLICABLE TO NON-RETAIL USERS AS RBI REGULATION:

a) Eligible products – Any derivative contract, including covered options, which the Treasury
Division, Mumbai can price and value independently and is approved by the Board, provided
07 51

that the potential loss from the derivative transaction to the user, in any scenario, does not
exceed the loss that the user would face if he had left the position unhedged.
b) All new products as permitted by RBI, will be cleared by the Board before being offered to
the clients. As such, Treasury Division to ensure approval of Board for the product made
available to the customers.

SPECIFIC DIRECTIONS OF RBI:

i. Domestic non-retail corporates having an INR liability may, at their discretion, convert it into
a foreign currency liability through a currency swap.
ii. For derivative contracts involving INR, AD Branches shall allow a user to book derivative
contracts up to USD 10 million or equivalent of notional value (outstanding at any point in
time) without the need to establish the existence of underlying exposure.
iii. Authorised Dealers will deal with a non-resident user (or its central treasury or its group
entity, where applicable) either directly or through the overseas bank of such user (including
our overseas branches) or through other overseas entities eligible to deal in derivatives as
per local regulations.
iv. In case of a central treasury of a non-resident user, the Authorised Dealers shall ensure
that the central treasury is appropriately authorised by the user to deal for and on its behalf.
v. Authorised Dealers shall ensure that in the case of a non-resident user all payables

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incidental to the hedge are met by the user out of repatriable funds and / or inward
remittance through normal banking channels.

CONTRACTED EXPOSURE AND ANTICIPATED EXPOSURE: Customer can avail the

facility of booking forward contracts under Anticipated Exposure or Contracted Exposure
provided all contracts involving deliverable Rupee are:
i. For the purpose of hedging as defined in the regulation.
ii. The notional value and tenor of the contract does not exceed the value and tenor of the
exposure at any point of time.
iii. The same exposure has not been hedged using any other derivative contract.

CONTRACTED EXPOSURE:
i. A contracted exposure is an exposure to the exchange rate of INR against a foreign

:23
currency on account of current and capital account transactions permissible under FEMA,
1999 or any rules or regulations made thereunder, which has already been entered into.
ii. If Contracts are booked against underlying exposure where the value of the exposure is
22 1
08
not ascertainable with certainty, such contracts may be booked on the basis of reasonable
/20 57
estimates (such as Master Sales Agreements or Master Procurement Agreement or similar
such arrangements). The Bank would make a reasonable estimation of the exposure based
on the documents submitted and its assessment of the client’s business. Such estimates
/11 89

would also be subject to periodic review.

iii. Contracts booked under contracted exposure can be rebooked after cancellation.
iv. AD Branches to have evidence of the underlying documents so that the existence of
07 51

underlying foreign currency exposure can be clearly established. Branches, through

verification of documentary evidence, should be satisfied about the genuineness of the
underlying exposure, irrespective of the transaction being a current or a capital account. Full
particulars of the contracts should be marked on the original documents under proper
authentication and kept on record for verification & audit purpose. However, in cases where
the submission of original documents is not possible, a copy of the original documents, duly
certified by the customer/ it’s authorized official, may be obtained. In either of the cases,
before offering the contract, branches should obtain an undertaking from the customer and
also quarterly certificates from the Chartered Accountant as under:
a) An undertaking from the customer that the same underlying exposure has not been
covered with any other bank/s. Where hedging of the same exposure is undertaken in parts,
with more than one bank, the details of amounts already booked with other bank/s should be
clearly indicated in the declaration. This undertaking can also be obtained as a part of the
deal confirmation.
b) An annual certificate from the Chartered Accountant of the customer to the effect that the
contracts outstanding with all banks at any time during the year did not exceed the value of
the underlying exposures be obtained. It is reiterated, however, that the AD branch while
entering into any derivative transaction with the client, shall have to obtain an undertaking
from the client to the effect that the contracted exposure against which the derivative

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transaction is being booked has not been used for any derivative transaction with any other
bank.
c) While details of the underlying documents have to be recorded at the time of booking the
contract, in view of logistic issues, a maximum period of 15 days may be allowed for
production of the documents. If the documents are not submitted by the customer within 15
days, the contract may be cancelled. Losses upon such cancellation shall be recovered and
gains, if any, shall not be passed on to the customer. Further, if customer defaults in
submission of documents within 15 days for more than three times in a financial year, then
the booking of permissible derivative contracts in future may be allowed only against
production of the underlying documents, prior to booking the forward contract.
v. Balances in the Exchange Earner's Foreign Currency (EEFC) accounts sold forward by
the account holders shall remain earmarked for delivery and such contracts shall not be
cancelled. They are, however, eligible for rollover, on maturity. Banks sought clarification
through FEDAI that whether sold forward contracts can be booked for a period of more than
one month earmarking the balances in the EEFC account. The FEDAI in consultation with

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RBI has clarified vide their Cir. No. SPL.-07/BC/Hedge/2018 (revised) dated 07th June 2018
that:
a) Booking of FCY/INR Fx. Contract maturing beyond end of following month is not
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consistent with extant directions of RBI.
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b) Booking of cross currency Fx. Hedge Contract maturing beyond end of following month
may be taken up based on underlying. As such, all concern to note above clarification for
strict compliance.
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ANTICIPATED EXPOSURE:
(a) A contract booked against an exposure to the exchange rate of INR against a foreign
07 51

currency on account of current and capital account transactions permissible under FEMA,
1999 or any rules or regulations made thereunder, which are expected to be entered into in
future. Therefore the amount of an anticipated exposure and the time by when it would
crystalize may not be precisely known at the time of entering into a hedge contract.
(b) When hedging under this facility, the customer will have to declare while booking the
contract that this is under anticipated exposure by submitting the undertaking. The amount
and tenor permissible for such hedges would be based on the AD branch assessment of the
reasonableness of such future exposure. The AD Branch may ask for additional details to
satisfy itself.
(c) AD Branch will obtain relevant information of exposure at the time of initiating the forward
contract booking. This information should include, at a minimum, basic details of underlying
contract (for e.g., current account, capital account, etc.).
(d) Where hedging is for capital account transactions, then information of such exposure e.g.
anticipated nature of transaction, expected date and amount of agreement may be
ascertained by AD Branch and such information be obtained from the customer.
(e) In the event that the bank is not satisfied about such underlying exposure within 15 days
of the forward contract booked, the Bank retains the right to cancel all or part of the contract.
The profits from such cancellations, if any, would not be passed on to the Customer while
losses would have to be borne by the Customer. An undertaking to the effect be obtained

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from customer and held on record.
(f) AD Branch may, in exceptional cases, pass on the net gains on contracts booked to
hedge an anticipated exposure whose underlying cash flow has not materialised, provided it
is satisfied that the absence of cash flow is on account of factors which are beyond the
control of the user. Such instances along with specific justification, shall be kept on record by
the AD Branch.
(g) If forward Contract is booked against previously hedged and cancelled forward contract,
the Customer to submit the unique reference no of previously hedged/cancelled contract at
the time of initiation of the rebooked contract. This will enable linking hedges on the same
anticipated exposure, and the Customers net losses on cancellations against prior profits on
cancellations can be adjusted. The net profits on such contracts however would be passed to
the customer only subject to satisfying of AD Branch as per the points mentioned above for
anticipated exposure. In absence of any such information of linkages at the time of booking
of contract, contract booked would be treated as new exposure. The discretion of linking
previous hedges either at the time of booking a new contract or at a future date, and the

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calculations of the net value of such contracts, would be at the sole discretion of the Bank.
(h) AD Branches should permit their customer to use the Anticipated facility only after
satisfying themselves that the following conditions are complied with:-
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i) An undertaking may be taken from the customer that supporting documentary evidence will
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be produced before the maturity of all the contracts booked.
ii) Importers and exporters should furnish a quarterly declaration to the branches duly
certified by Chartered Accountant, regarding amounts booked with other banks under this
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facility, as per Annexure IX.

iii) For an exporter customer to be eligible for this facility, the aggregate of overdue bills shall
not exceed 10 percent of the turnover.
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iv) The Anticipated exposure limits once utilised cannot be reinstated either on cancellation
or on maturity of the contracts subject to satisfaction of AD Branch.
v) As a part of the annual audit exercise, customer shall submit the Chartered Account
certificate to respective AD branch certifying that :-
(a) The amounts booked with other AD Category-I banks and our Bank under this facility;
and
(b) All guidelines have been adhered to while utilizing this facility over the past financial year.
vi) Branches/Sanctioning Authority, based on customer declaration and other information
provided, will assess and validate the Anticipated exposure limits at pre-deal stage. In
addition to the customer declarations, branches shall assess the past transactions of
customers, turnover, activity & ability to execute orders etc. to arrive at a decision of setting
up maximum permissible forward contract limits against anticipated exposure.

Guidelines on outstanding exposure as on date of issuance of revised guidelines

contained in RBI Master Direction No. RBI/FMRD/2016-17/31 FMRD Master Direction
No. 1/2016-17 dated 05.07.2016(Updated as on 01.09.2020) on Risk Management and
Inter-Bank Dealings.
(a) The new regulations and the revised guidelines of the RBI come into effect from June 1,
2020, the effective date. Existing contracts booked under the provisions of the directions

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before the effective date may be continued till the date of their expiry.
(b) Accordingly, the AD Branch shall seek associated documents/declarations from customer
as was required under the earlier guidelines till the maturity or market action such as
cancellation/rollover (whichever is earlier) of these hedge contracts.
(c) Rollover or rebooking of such contracts, and all new contracts from the effective date
onwards shall be governed by the new regulations and these guidelines.
(d) Facilities such as Past Performance, Simplified Hedging, Self-declaration are withdrawn
from the effective date and replaced with only two types of underlying exposure–Contracted
Exposure and Anticipated Exposure.

GENERAL TERMS AND CONDITIONS FOR DERIVATIVE CONTRACT FOR

COMPLIANCE OF AD BRANCHES:
(a) The permissibility of products to customer is defined as per User Classification at Para 5
above. However, the AD Branch, subject to availability at Treasury Division, retains the right
at its sole discretion to decide which of the permitted products would be offered to a

:23
customer, including the currency pairs and interest rate benchmarks in which the derivative
products could be offered. The product offering of the AD Branch shall be guided by the
extant guidelines on derivatives, guidelines on suitability and appropriateness, internal
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policies and procedures in line with the RBI guidelines on subject, products offered by
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Treasury Division and the assessment of the customer by credit sanctioning authority.
(b) Once a contract is entered into for an underlying exposure, any change in the existing
underlying exposure for which contract has been booked and outstanding, will be brought to
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the notice of the AD Branch & Treasury Division. The outstanding contracts, if any, for such
exposures to be modified suitably, including part cancelling or all of the notional value by AD
Branch in consultation with Treasury Division, Mumbai to comply with regulations under the
07 51

framework.
(c) In order to satisfy itself on the applicability of relevant regulations and internal guidelines,
the AD Branch may ask for additional information from the customer which may include
following:
i. Documentary proofs of underlying exposures.
ii. Basis of assessments of anticipated exposures.
iii. Declarations or certifications from the customer or from external parties.
iv. Any other aspects related to the exposures and hedges of the customer.
(d) Failure to adhere to such requests, or in cases where the AD Branch is not reasonably
satisfied about the underlying exposures, or in case there is a reason for the AD Branch to
believe that there has been misuse of the facilities provided or misrepresentations to the AD
Branch, the AD Branch retains the right to;
i. Reclassify exposures.
ii. Cancel contracts and withhold profits and recover losses from such cancellations.
iii. Enter into further transactions only on being convinced of the exposure, if necessary by
seeking documents prior to the deal, or.
iv. Any other form of action to protect the interest of the bank and ensure conformity with
extant regulations.
(e) AD Branch to obtain information, declaration, undertaking or document from the customer

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to ensure compliance of the RBI regulation in physical form while availing/ entering into
contracts with AD Branch/Treasury Division, Mumbai. AD Branch may seek additional
information in accordance with Customer’s own constitution and the same shall be kept on
record for audit purpose.
(f) By entering into any derivative deal with the AD branch post the effective date of
regulations, the customer to undertake & declare that the terms of derivative framework are
understood and accepted. Such undertaking shall be obtained and kept on record.

PROCEDURE FOR SET-UP OF PARTY LIMITS FOR BOOKING OF FORWARD

CONTRACTS: The basis of fixing the forward contract limits shall be;
a) Specific forward contract limit needs to be set up as part of the overall credit limit
sanctioned by the Bank in favour of the client on written request.
b) No separate processing fee for setting up forward contract limit should be charged from
the customer. However, no forward contract limit shall be set up for booking of forward
contracts against FCNR (B) deposits, EEFC funds.

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c) The basis for fixing the forward contract limits shall be credit assessment of the customer,
nature and volume of the transaction undertaken by the customer in past 3 years &
anticipated exposure. Quantum of Forward Contract Limits to be sanctioned should be in
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alignment with the credit facility/foreign exchange requirements/working capital requirements
/20 57
/capital expenditure. Branches should maintain separate register for booking of Forward
contract under different products on CBS or Manually. Credit Exposure components of
notional forward contract limit shall be secured by extending charge on current assets and
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other collateral securities as applicable for working capital facilities. In case forward contract
is booked in relation to capex transaction, charge on the said fixed asset and other collateral
available for the said facility to be obtained as applicable for capex limits. User
07 51

appropriateness and suitability may also be considered while fixing the limit.
d) Powers vested in various offices for sanctioning facility for booking of forward contracts
are as per Annexure I (Forward Purchase Contract) and Annexure II (Forward Sale
Contract).
e) In case of Non-Borrowal accounts, while sanctioning foreign exchange forward contract
limit, the sanctioning authority to satisfy about the creditworthiness of customer to be good
for value such as genuineness of transaction, recovery of cancellation charges in the
eventuality of forward contract is cancelled and availability of additional margin in case of
adverse fluctuation. A limited credit assessment to cover the credit exposure on account of
booking of forward contract has to be done and limit for forward contract to be fixed
accordingly. A limited credit assessment and proper due diligence has to be undertaken
before offering this facility.
f) The limits for booking forward contracts may also be fixed on the basis of Anticipated
exposure against undertaking of customer. The limit will be based on the AD branch
assessment of the reasonableness of such future exposure. The AD Branch may ask for
additional details to satisfy itself. The customer to submit request for sanction of forward
contract limit against Anticipated Exposure facility as per Annexure-VIII. A declaration on the
letter head of the Company shall be furnished by concerned exporter/importer regarding the
amount booked with other banks under Anticipated exposure basis as per Annexure-IX. The

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limits shall be sanctioned only after obtaining complete information from other banks with
which the constituent may also be dealing as the Anticipated exposure limit proposed under
RBI guidelines are cumulative of all banks. The limits as permitted by RBI are from the whole
of the banking sector and not bank wise. In case the customer is already enjoying forward
contract limits based on declaration basis from other banks, the sanction of limit shall be
after reducing the limits sanctioned by other banks. However, the outstanding contracts at
any time shall not exceed the limits fixed as proposed above. A declaration to be obtained for
utilizing forward contract limit against anticipated exposure in excess of 50% sanctioned
against anticipated exposure facility as per Annexure-X.
g)In order to comply with RBI guidelines, it is to be ensured that the corporate clients have
drawn up a board approved “Risk Management Policy”, wherever mandatory, laid down clear
guidelines for concluding the transactions and institutionalized the arrangements for a
periodical review of operations and annual audit of transactions to verify compliance with the
regulations.
h) Branch to obtain an agreement from the customer for sanctioned forward contract limit as

:23
per Annexure III which will be part of documents obtained for the credit limit sanctioned.
i) The forward contract purchase/sale limits sanctioned in terms of Power chart for booking of
forward contracts for customer as per Annexure I and II, should be made a part of the “Limit
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Node” of the customer in CBS through menu option HLNM “FWCS” for Sale Contract and
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“FWCP” for Purchase Contract and the equivalent credit exposure in terms of extant bank
guidelines be reported in the exposure of the customer, so that the bank can ascertain the
total exposure on the customer inclusive of forward contracts.
/11 89

j) AD branch shall provide copy of forward contract limit sanctioned letter to Treasury
Division before placing a request to Treasury Division for booking of forward contract of the
said customer.
07 51

k) Treasury Division shall maintain the customer wise forward contracts exposures vis-à-vis
the limits fixed for booking the forward contracts. Treasury Division will also ensure that no
contract be booked beyond the sanction limit.
l) In case the forward contract limit of the customer exceeds vested power of current
sanctioning authority, the approval of next higher authority will be obtained by the branch for
booking of said forward contract if it is permitted in terms of RBI/Bank’s extant guidelines.
m) If limit has been enhanced by the sanctioning authority as per RBI/Bank’s extant
guidelines, copy of revised sanction letter shall be provided to Treasury Division for the
updation of their record before making the request for booking of forward contract at the
request of customer.
n) In case of Non-Borrowal resident customers, branches upto the level of Scale IV shall take
the prior approval of MCC-V/PLP-V for booking of forward contract limit for such customers.
Branch Head of LCBs/eLCBs & Scale V is permitted to sanction the forward contract limit to
current account holders or resident individual Non-Borrowal customer of the Branch, who are
not availing any credit facilities as per guidelines contained in the circular.
o) The facility to book forward contracts under anticipated exposure basis shall be permitted
selectively and to reputed clients having proper management controls and professional
conduct.
p) Sanctioning authority is advised to specifically mention, in sanction letter, the facility under

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which forward contract limit has been sanctioned, enabling proper reporting to RBI viz.
Contracted exposure, Anticipated exposure, and also type of clientele i.e. Retail and
NonRetail etc.

C. MARGINS ON FORWARD CONTRACT LIMITS:

a) In case of outstanding of forward contract booked by the customer exceeds their Post
Shipment/Import Letter of Credit limit, any adverse fluctuation in foreign exchange rates vis-
a-vis the contract rate, the borrower be asked to provide additional margin upto the extent of
adverse MTM where the breach of following limit takes place:-
I. Adverse fluctuation is more than 3.0% in case of outstanding of forward contract booked
upto USD One Million or equivalent.
II. Adverse fluctuation is more than 1.50% in case of outstanding of forward contract booked
more than USD One Million or equivalent.
b) In case the forward contract limit is within post shipment / import letter of credit limit, no
additional security/margin may be insisted upon. However, limit for the amount of MTM shall

:23
be earmarked and the sanctioned margin, if any, for the amount of MTM shall be obtained
invariably.
c) IRMD L& A Cir No 60 dated 07.04.2021 on Credit Management & Risk Policy inter-alia
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advise that exchange rate contracts with original maturity upto one year or less will receive
/20 57
Credit Conversion Factor (CCF) of 2%, above one year upto 5 years CCF of 10% and above
5 years CCF of 15%. Accordingly, in case of fixing of forward contract limit for Borrowal and
Non-Borrowal A/cs, branches should stipulate margin as under:
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Internal Risk Ratings Exchange rate contracts with Margin

original maturity upto
07 51

B2 and above one year or less 5%

above one year upto 5 years 10%
above 5 years 15%
B3 and below category one year or less 10%
above one year upto 5 years 15%
above 5 years 20%
Non-Borrowal Customer one year or less 5%
above one year upto 5 years 10%
above 5 years 15%

Margins prescribed above are minimum. However, higher margins may be stipulated
wherever deemed necessary.
Based on merits of the case, the relaxation in margin, may be allowed by various committee.

MONITORING OF FORWARD CONTRACTS

MONITORING AT BRANCH LEVEL:

(a) A report on forward contract falling due be generated through CBS menu “GBFWCR” and
checked on a daily basis to enable reminders to customers for execution of forward contracts
which are falling due in coming week.

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(b) Branches may also generate a daily report “LOMFWC” from CBS for list of overdue and
matured forward contracts to be cancelled within 3 days from due date. This will enable
branches to follow-up with customer.
(c) Branches to obtain underlying contract/order/LC duly signed by the respective customer,
Forward contract agreement executed by customer along with original application for
booking forward contracts and record of the same will be maintained by concern AD Branch
for audit purpose.
(d) Treasury Division to send confirmation copy of the forward contract to respective branch
for acceptance by the party within 24 hours of booking of the contract. On receipt of
confirmation from Treasury Division as per AnnexureVI/VII for purchase or sale contract
respectively, branch will obtain confirmation immediately from the customer. The branch will
send copy of the forward contract confirmation, duly accepted and signed by the party, and
countersigned by branch official to Treasury Division over fax/email immediately, and hard
copy by courier/post within 7 working days of receipt of the same from the customer. Branch
copy of the confirmation duly signed by customer shall be retained at branch for audit

:23
purpose.
(e) Non-submission of confirmation for booked contract by customer should be brought to the
notice of Zonal Office/Treasury Division immediately by AD Branch. In case the customer
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refutes having booked the contract, the liabilities need to be crystallized forthwith with the
/20 57
permission of the Zonal Manager and appropriate steps be initiated for recovery of the
cancellation charges from the customer, if any, by concerned branch.
(f) In case additional margin for MTM is not provided by the customer within the stipulated
/11 89

period from the date of demand, the branch shall have the option of crystallizing the liabilities
by cancelling the forward contracts, for which necessary undertaking be obtained from the
customer as per the Agreement. Customer’s undertaking in this regard shall also be taken as
07 51

a part of the application to book the contract.

(g) Branches to ensure that charges with regards to cancellation/ rebooking/swap/exchange
loss reported by Treasury Division are recovered from customer and remitted to Treasury
Division.
(h) Branches to ensure forward contracts outstanding in CBS is tallied with the outstanding of
Treasury Division by generating report from CBS Finacle, menu option “DAYRPT 7/45” as on
last day of the month.
(i) AD Branch to ensure that where underlying documents are not submitted by the party at
the time of booking of contract under contracted exposure is received within 15 days from
the date of booking of contract. If underlying documents are not submitted by the customer
within 15 days, the contract may be cancelled. Losses upon such cancellation shall be
recovered and gains, if any, shall not be passed on to the customer. Further, if customer
defaults in submission of documents within 15 days for more than three times in a financial
year, then the booking of permissible derivative contracts in future may be allowed only
against production of the underlying documents, prior to booking the forward contract. A
record of the same shall be maintained at branch for audit purpose. Concurrent auditor,
wherever posted, to ensure compliance of above instructions are commented in their audit
report.
(j) AD Branch to ensure that supporting documentary evidence is submitted before the

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maturity of contracts booked under anticipated exposure by the customer and record of the
same shall be maintained at branch for audit purpose. Concurrent auditor, wherever posted,
to ensure compliance of above guidelines are commented in their audit report.
(k) AD branches including LCBs/eLCBs to submit monthly certificate of reconciliation of
forward contract outstanding in branch duly certified by the concurrent auditor, wherever
posted, to respective Zonal Office by 5th day of the following month for monitoring. The
certificate also includes a confirmation that all underlying documents in respect of forward
contract booked under Contracted Exposure have been received and kept on record. No
underlying documents are pending beyond 15 days from the date of booking of contract
under Contracted exposure and underlying documents have been received and kept on
record in respect of all forward contract matured during the month under Anticipated
Exposure.
(l) The statement relating to exposure in foreign currency as on last day of quarter
(Annexure–XIV) shall be submitted by the AD Branches including LCBs/eLCBs to the
concerned Zonal Office on quarterly basis so as to reach the Zone by 3rd day of the

:23
following month.
(m) The statement relating to Reporting of Suspicious Transactions Undertaken by Non-
Resident Importers/Exporter as on last day of quarter (Annexure–XV) shall be submitted by
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the AD Branches including LCBs/eLCBs to the respective Zonal Office on quarterly basis so
/20 57
as to reach the Zone by 3rd day of the following month.
(n) The statement relating to Hedging of Commodity Price Risk and Freight Risk in Overseas
Markets as on last day of quarter (Annexure–XVI) shall be submitted by the AD Branches
/11 89

including LCBs/eLBCs to the concerned Zonal office on quarterly basis so as to reach Zone
by 5th day of the following month.
07 51

MONITORING AT ZONAL OFFICE LEVEL:

(a) Zonal Office to collect monthly certificates of reconciliation of forward contracts
outstanding at branches including LCBs/eLCBs duly signed by Branch Heads under the
Zone. Based on these collected certificates, Zonal Office to submit a single monthly
compliance certificate of reconciliation of forward contract outstanding as on last day in
respect of all branches including LCBs/eLCBs under the Zone to IBD-HO duly signed by the
Deputy Zonal Manager so as to reach IBD-HO by 10th of the following month. The certificate
also includes a confirmation that all underlying documents in respect of forward contract
booked under Contracted Exposure have been received and kept on record. No underlying
documents are pending beyond 15 days from the date of booking of contract under
Contracted exposure and underlying documents have been received and kept on record in
respect of all forward contract matured during the month under Anticipated Exposure.
(b) Zonal Office to monitor receipt of underlying documents by customer at respective branch
within 15 days from the date of booking of contract, which was not submitted at the time of
booking of contract under the contracted exposure.
(c) Zonal Office will follow up with respective branch till logical end for pending acceptance
by the party for the contract booked as reported by Treasury Division.
(d) Zonal Office to monitor and follow-up for issues related to Non-submission of the contract
confirmation by customer as reported by AD Branch. In case the customer refutes having

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booked the contract, Zonal Manager to accord permission to crystalize liabilities. Zonal office
to intervene and initiate appropriate steps for recovery of the cancellation charges from the
customer, if any.
(e) Zonal Office to collect quarterly statement from Branches and LCBs/eLCBs on Exposure
in Foreign Currency in all AD branches as per the Annexure–XIV. Zonal Offices will
consolidate the data of Annexure-XIV in respect of all AD branches, LCBs & eLCBs under
the Zone and submit single Annexure-XIV, duly signed by Deputy Zonal Manager, to
International Banking Division, Head Office, New Delhi so as to reach IBD-HO by 7th of the
following quarter.
(f) Zonal Office to collect quarterly statement from AD Branches and LCBs/eLCBs on
Reporting of Suspicious Transactions Undertaken by Non-Resident Importers/Exporter in all
AD branches as per Annexure–XV. Zonal Office to submit consolidated data as per
Annexure-XV in respect of AD branches in their Zone to HO-IBD New Delhi, duly signed by
Deputy Zonal Manager, so as to reach IBD-HO by 7th of the following quarter. (g) Zonal
Office to collect quarterly statement from Branches and LCBs on Hedging of Commodity

:23
Price Risk and Freight Risk in Overseas Markets in all AD branches as per Annexure–XVI.
Zonal Office to consolidate & submit compiled data as per Annexure-XVI in respect of all AD
Branches in their Zone to HOIBD, New Delhi, duly signed by Deputy Zonal Manager, so as
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to reach IBD-HO by 7th of the following quarter.
/20 57
MONITORING AT INTERNATIONAL BANKING DIVISION
(a) International Banking Division, HO to obtain certificate of reconciliation of outstanding of
/11 89

forward contract from all Zones, analyze them and initiate corrective action for variations, if
any. IBD, HO to maintain record of certificate of reconciliation of outstanding of forward
contract received from Zonal Offices for audit purpose. The certificate also includes a
07 51

confirmation that all underlying documents in respect of forward contract booked under
Contracted Exposure have been received and kept on record. Further, No underlying
documents are pending beyond 15 days from the date of booking of contract under
Contracted exposure and underlying documents have been received and kept on record in
respect of all forward contract matured during the month under Anticipated Exposure.
(b) IBD-HO to collect statement relating to exposure in foreign currency in all AD branches
as on last day of quarter as per Annexure -XIV from all Zones. IBD, HO will submit the
consolidated statement as per Annexure-XIV received from Zones to Reserve Bank of India
(RBI) through the Extensible Business Reporting Language (XBRL) system which may be
accessed at https:// [Link]/orfsxbrl/ so as to reach RBI by 15th of the following
quarter.
(c) IBD-HO will collect, compile and submit consolidated statement relating to Reporting of
Suspicious Transactions Undertaken by Non-Resident Importers/Exporter in all AD branches
as on last day of quarter as per AnnexureXV received from Zonal Offices to RBI through mail
on fmrdfx@[Link] so as to reach RBI by 10th of the following quarter. (d) IBD-HO will
collect, compile and submit statement, bank as whole, relating to Hedging of Commodity
Price Risk and Freight Risk in Overseas Markets in all AD branches including LCBs/eLCBs
as on last day of quarter as per AnnexureXVI duly compiled by Zonal Offices to RBI through
mail on fmrdfx@[Link] so as to reach RBI by 10th of the following quarter.

International Banking Page 131

MONITORING AT TREASURY LEVEL:
(a) Upon receipt of copy of forward contract sanction limit letter from AD Branch, Treasury
Division will maintain details of customer wise forward contracts exposures vis-à-vis the
limits fixed for booking the forward contracts. Treasury Division to ensure that forward
contract is booked within the sanctioned forward contract limit of the customer.
(b) Treasury Division shall send copy of the forward contract to the branch for acceptance by
the party within 24 hours of booking of the contract as per Annexure-VI/VII for respective
purchase or sale contract.
(c) Treasury Division to ensure receipt of customer’s confirmation copy, duly accepted as per
Annexure-VI/VII for respective purchase or sale contract, in respect of Forward Contract
booked, from the branch. Treasury Division to mark receipt of such confirmation in Forward
Contracts Register and maintain a record of confirmation copy for audit purpose.
(d) Once the reporting of AD branch in RET-AD for extension/cancellation/roll over of the
existing forward contract is received at Treasury Division, Treasury Division to ensure that

:23
such reporting is in order and contract has been extended/cancelled/rebooked, as the case
may be, at the prevailing current rate under advice to the concerned AD branch.
(e) In case of early / late delivery/extension/cancellation/roll over, charges should be
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calculated in terms of FEDAI rules and the amount recoverable should be noted in the
/20 57
Forward Contracts Register [Link] Exchange difference/charges recoverable should
be recovered from the proceeds by giving suitable note in the register or from the customer
through the concerned branch.
/11 89

(f) Treasury Division will prepare a MTM report of all outstanding contracts, branchwise,
customer-wise, contract-wise on weekly basis and in case of adverse MTM, the MTM Report
will be sent to the concerned branch, under copy to concern Zone, within 2 working days
07 51

from the close of concerned week through e-mail or by any other fastest means of
communication followed by hard copy by post/courier. The customer will be asked to top up
the margin within 3 working days from the date of demand, failing which the Branch shall
have the option of cancelling forward contract at the risk and responsibility of the customer.
However, Treasury Division will set up a system to have monitoring of daily MTM for forward
contracts portfolio and any negative MTM above 1.5% will be the trigger point for top up.
Once the trigger point is hit, Treasury Division will inform concerned branch/Zone through
fastest means of communication i.e. e-Mail or Courier etc with an instruction to take up with
customer immediately for top up and confirm Treasury Division about the receipt of required
additional margin. Treasury Division to maintain record of confirmation received and update
the margin held at branch accordingly.
(g) Treasury Division shall submit a monthly statement to Credit Review & Monitoring
Division, HO/Zonal Office/Respective Branches, details of outstanding forward contract
cancellation charges or any other charges (Annexure XIII) so as to ascertain a clear picture
of overdue charges, bank as a whole. CRMD/Zonal Office/Branch to ensure remedial
measures are taken for recovery of overdue charges in respect to accounts under their
monitoring and mitigate associated credit risk.
(h) Treasury Division shall tally the outstanding forward contracts as on last day of the month
with the outstanding at AD branches. Treasury Division to provide the report of outstanding

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forward contracts as at the end of the month to all concern AD branches for reconciliation at
their end. Treasury Division to ensure that a confirmation, having reconciled the outstanding
of forward contract with CBS, is obtained from AD branches on monthly basis.
(i) Treasury Division to obtain confirmation from branch having obtained underlying
documents which were due for submission within 15 days from the date of booking forward
contract. Such confirmation to be kept on record with respective contract confirmation for
audit purpose. Concurrent Auditor at Treasury Division to ensure compliance and comment
in their audit report on subject.
(j) At the time of booking of forward contracts/ other derivative products on behalf of
customers, Treasury Division to ensure that applicant is holding valid LEI Number, wherever
mandatory. It will be prudent to make provision of capturing LEI Number in Treasury
Software, till such time, a manual register of LEI details of clients requested for booking of
forward contract/other derivative products be maintained at Treasury for audit purpose.

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POWER CHART FOR BOOKING OF FORWARD CONTRACTS FOR CUSTOMERS

22 1
08
FORWARD PURCHASE CONTRACTS
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Authority Sanctioning Limits
Branch Heads of GBBs Not more than two times of the vested power for
/11 89

sanction of post-shipment credit limits as per

Loans & Advance Cir. No. 61/2021 dated
07.04.2021, as amended from time to time. It
07 51

shall be within the overall limits for eligible

products as prescribed by RBI for Retail & Non-
Retail customers from time to time. Specific
forward contract limit shall be set up as a part of
the overall credit limit sanctioned.
MCC-V & IV, PLP-V & IV & Branch Heads of Not more than three times of: i. Power vested
LCB/eLCB for sanction of post-shipment credit limits as per
Loans & Advance Cir. No. 61/2021 dated
07.04.2021, as amended from time to time. It
shall be within the overall limits for eligible
products as prescribed by RBI for Retail & Non-
Retail customers from time to time. Specific
forward contract limit shall be set up as a part of
the overall credit limit sanctioned.
OR
ii. Post-shipment limit sanctioned by higher
authorities. Whichever is higher, and within the
limit prescribed by Reserve bank of India.

ZOCAC-I & Above Full Powers, and shall be within the overall
limits for eligible products as prescribed by RBI
for Retail & Non-Retail customers from time to

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 time. Specific forward contract limit shall be set
up as a part of the overall credit limit
sanctioned.

FORWARD SALE CONTRACTS

Authority Sanctioning Limits

Branch Heads of GBBs Not more than two times of the vested power for
sanction of Foreign Letter of Credit limits as per
Loans & Advance Cir. No. 61/2021 dated
07.04.2021, as amended from time to time. It
shall be within the limits & products as
prescribed by RBI for Retail & Non-Retail
customers from time to time. Specific forward
contract limit shall be set up as a part of the

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overall credit limit sanctioned.
MCC-V & IV, PLP-V & IV & Branch Heads of Not more than three times of : i. Power vested
LCB/eLCB for sanction of Foreign Letter of Credit limits as
22 1 per Loans & Advance Cir. No. 61/2021 dated

08 07.04.2021, as amended from time to time. It

/20 57
shall be within the limits & products as
prescribed by RBI for Retail & Non-Retail
customers from time to time. Specific forward
/11 89

contract limit shall be set up as a part of the

overall credit limit sanctioned.
07 51

OR
ii. Foreign Letter of Credit limit sanctioned by
higher authorities. Whichever is higher, and
within the limits prescribed by Reserve bank of
India.

ZOCAC-I & Above Full Powers, and shall be within the limits &
products prescribed by RBI for Retail & Non-
Retail customers, as advised from time to time
under regulations. Forward purchase limits be
made a part of sanctioned credit facility

FOREIGN EXCHANGE FORWARD CONTRACTS – FORMS (IBD FEX Cir 86/2021)

Agreement of Forward Contract for Sale & Purchase PNB 1263 (FEX)
Application for Booking of Forward Purchase Contract PNB 1264 (FEX)
Application for Booking of Forward Sale Contract PNB 1265 (FEX)
Confirmation for Booking of Forward Purchase Contract PNB 1266 (FEX)
Confirmation for Booking of Forward Sale Contract PNB 1267 (FEX)
Request for sanction of limit for booking of forward contracts on the PNB 1268 (FEX)
basis of Anticipated Exposure (April 01 to March 31)

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POLICY FOR HEDGING OF FOREIGN CURRENCY LOANS (FCL/FCTL) AND
ON MANAGING FOREIGN CURRENCY RATE MOVEMENT RISK IN NON-FUND BASED
EXPOSURES

(IBD FOREIGN EXCHANGE CIRCULAR NO: 21/2022)

Policy for Hedging of Foreign Currency Loans (FCL/FCTL) and on Managing Foreign
Currency Rate Movement Risk in Non-Fund based exposures was approved by Board in its
meeting held on 29.03.2022

OBJECTIVE: While making Policy for exposure norms, the Bank will continue to
stress upon for Hedging of Foreign Currency Loans (FCL/FCTL) and on Managing
Foreign Currency Rate Movement Risk of Non Fund based exposures. The Bank
will continue to strive towards achieving the following objectives:

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i. Comply with all RBI guidelines including those relating to Hedging of Foreign
Currency Loans (FCL/FCTL) and on Managing Foreign Currency Rate Movement
Risk of Non Fund based exposures; 22 1
08
/20 57
ii. Minimizing risk because of fluctuations in foreign currency rate due to volatility
in the Foreign Currency market;
/11 89

iii. To endeavour hedging of Foreign Currency exposures by constituents to the

maximum extent.
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The reviewed policy consists of four sections

SECTION- A - FUND BASED EXPOSURES: FCL/FCTL etc.

SECTION- B - NON-FUND BASED EXPOSURES - FOREIGN LETTER OF CREDIT
(FLC)/FOREIGN LETTER OF GUARANTEES (FLG)/STAND BY LETTER OF
CREDIT (SBLC)/ TRADE CREDIT (BUYERS CREDIT)/ECB /DEFERRED
PAYMENT GUARANTEES etc.
SECTION-C - NON-FUND BASED EXPOSURES - FLC/FLG/TRADE CREDIT
(BUYER’S CREDIT) /ECB/DEFERRED PAYMENT GUARANTEE etc. AGAINST
100% MARGIN IN BORROWAL/NON-BORROWAL ACCOUNT.
SECTION-D - OTHER CONDITIONS/MONITORING/ GENERAL CONDITIONS
etc.

Foreign Exchange Dealers Association of India (FEDAI)

(IBD Foreign Exchange Circular No.15/2022)

1. The member banks are free to determine their own charges for various types of forex
transactions, keeping in view the advice of RBI that such charges are not to be out of line

International Banking Page 135

with the average cost of providing services. Banks should take care to ensure that
customers with low volume of activities are not penalised.
2. Banks should prominently display their card rates for foreign currencies on their website
and / or their B Category branches. Banks should also declare
i. Threshold amounts up to which they are committed to apply card rates.
ii. Frequency and time of publishing the card rate

GIST OF IMPORTANT FEDAI RULES:

Rule 1 Hours of Business
1.1 The normal market hours for FCY/INR transactions in Inter-bank forex market as
well as client transactions in India would be from 9.00 a.m. to 5.00 p.m. IST on all
working days.

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1.2 (A) Authorised dealers may undertake customer (persons resident in India and
persons resident outside India) and inter-bank transactions on all working days
beyond normal market hours.
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(B) Transactions with persons resident outside India, through their foreign branches
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and subsidiaries may also be undertaken on all working days beyond normal market
hours.
C) Transactions, including value cash transactions, for individual persons (including
/11 89

joint account or proprietary firm) can be undertaken even on Saturdays, Sundays and
holidays as per banks internal policy.
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D) Any transaction undertaken beyond the market hours prescribed under Rule 1.1,
bank must ensure that: NOOP Limit is maintained all the times [including
transactions executed from EOD to 9.00 am IST (market opening time) next working
day].
Spot date Roll over for FCY/INR transactions will take place at 12.00 midnight IST.
1.3 For the purpose of Foreign Exchange business, Saturday will not be treated as a
working day. except for transactions as stated in 1.2 (C) above.
1.4 “Known holiday” is one which is known at least 3 working days before the date.
A holiday that is not a “known holiday” is defined as a “suddenly declared holiday”.
Rule 2 EXPORT TRANSACTIONS
2.1. Post shipment Credit in Rupees
a) Application of exchange rate:
Foreign Currency bills will be purchased/discounted/negotiated at the Authorised
Dealer’s current bill buying rate or contracted rate. Interest for the normal transit
period and/or usance period shall be recovered upfront simultaneously.
b) Crystallisation and Recovery:

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i) Authoried Dealers should formulate own policy for crystallisation of foreign currency
liability into rupee liability, in case of non-payment of bills on the due date.

ii) The policy in this regard should be transparently available to the customers.

iii) For crystallisation into Rupee liability, the Authorised Dealer shall apply its TT
selling rate of exchange. The amount recoverable, thereafter, shall be the crystallised
Rupee amount along with interest and charges, if any.

iv) Interest shall be recovered on the date of crystallisation for the overdue period at
the appropriate rate; and thereafter till the date of recovery of the crystallised amount.

v) Export bills payable in countries with externalisation issues shall also be

crystallised as per the policy of the authorised dealer, notwithstanding receipt of
advice of payment in local currency.

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c) Realisation of Bills after crystallisation.

After receipt of advice of realisation, the authorised dealer will apply TT buying rate or
22 1
08
contracted rate (if any) to convert foreign currency proceeds.
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d) Dishonour of bills
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In case of dishonour of a bill before crystallisation, the bank shall recover.

i) Rupee equivalent amount of the bill and foreign currency charges at TT selling rate.
07 51

ii) appropriate interest and rupee denominated charges.

2.2. Application of Interest

a) Rate of interest applicable to all export transactions shall be as per the guidelines of
Reserve Bank of India from time to time.
b) Overdue interest shall be recovered from the customer, if payment is not received
within normal transit period in case of demand bills and on/or before notional due
date/actual due date in case of usance bills, as per RBI directive.
c) Early Realisation In case of early realisation, interest for the unexpired period shall
be refunded to the customer. The bank shall also pay or recover notional swap cost as
in the case of early delivery under a forward contract. Interest on outlay/ inflow of
funds for such SWAPS shall also be recovered/ paid as per Rule 6 para 6.6.

2.3. Normal Transit Period

Concepts of normal transit period and notional due date are linked to interest rate on
export bills and to arrive at due date of the bill/export credit. Normal transit period
comprises of the average period normally involved from the date of

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negotiation/purchase/discount till the receipt of bill proceeds. It is not to be confused
with the time taken for the arrival of the goods at the destination. Normal transit
period for different categories of export business are laid down as below.
a) Fixed Due Date In the case of export usance bills, where due dates are fixed or are
reckoned from date of shipment or date of bill of exchange etc., the actual due date is
known. Therefore, in such cases, normal transit period is not applicable.
b) Bill drawn on DP/At Sight Basis and not under Letter of Credit (LC)
(i) Bill in Foreign Currencies – 25 days
(ii) Bills in Rupees not under Letter of Credit – 20 days
AD Bank may apply transit period that varies (Higher or lower) from above prescribed
NTP for exceptional situations based on historic data for specific exporter/overseas
buyer/supply destination and mode of transportation etc. Any deviation from above
prescribed NTP should be documented with rationale for such deviation. In case of
extending finance beyond above prescribed NTP, maximum period is restricted up to

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90 days from the date of shipment. AD Bank should be responsible to demonstrate the
document relying upon which the facility of post-shipment export finance provided for
extended/reduced NTP period. No changes in due date shall be permitted subsequent
22 1
to the purchase, discounting or negotiation of export bill.

08
/20 57
c) Exports to county under United Nations Guidelines – Max. 120 days
d) Bills drawn in Rupees under Letters of Credit (L/C)
/11 89

i) Reimbursement provided at centre of negotiation - 3 days

ii) Reimbursement provided in India at centre different from centre of negotiation - 7
days
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iii) Reimbursement provided by banks outside India - 20 days

iv) Exports to Russia where reimbursement is provided by RBI - 20 days
e)TT reimbursement under Letters of Credit (L/C)
i) Where L/C provides for reimbursement by electronic means – 5 days

ii) Where L/C provides reimbursement claim after certain number of days from the
date of negotiation – 5 days + this additional period.

2.4. Substitution/Change in Tenor

a) In case of change in the usance of a bill, interest on post shipment credit shall be
charged to the customer, as per internal guidelines of respective bank. In addition, the
bank shall charge or pay notional swap difference. Interest on outlay/inflow of funds
for such swaps shall also be recovered / paid as per Rule 6 para 6.6.

b) It is optional for banks to accept delivery of bills under a contract made for
purchase of a clean TT. In such cases, the bank shall recover/pay notional swap

International Banking Page 138

difference for the relative cover. Interest on outlay/inflow of funds for such swaps shall
also be recovered/paid as per Rule 6 para 6.6.

2.5. Export Bills sent for collection:

a) Application of exchange rates The conversion of foreign currency proceeds of export

bills sent for collection or of goods sent on consignment basis shall be done at
prevailing TT buying rate or the Fx contract rate, as the case may be. The conversion
to Rupee equivalent shall be made only after the foreign currency amount is credited
to the Nostro account of the bank.
b) On receipt of credit advice/statement of Nostro account and compliances of
guidelines, requirements of the Bank and FEMA, the Bank shall transfer funds for the
credit of exporter’s account within two working days.
c) If the above stipulated time limit is not observed, the Bank shall pay compensation
for the delayed period at the minimum interest rate charged on export credit.

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Compensation for adverse movement of exchange rate, if any, shall also be paid as per
the compensation policy of the bank.

22 1
Rule 3 : IMPORT TRANSACTIONS
08
/20 57
3.1 Application of exchange rate:
/11 89

a) Retirement of import bills – Exchange rate as per forward sale contract, if forward
contract is in place.
07 51

Prevailing Bills selling rate, in case there is no forward contract.

b) Crystallisation of Import (vide para 3.3 below) – same as above bill

c) For determination of stamp – As per exchange rate provided by the duty on import
bills authority concerned.

3.2. Application of Interest:

a) Bills negotiated under import letters of credit shall carry commercial rate of interest
as applicable to banks’ domestic advances from time to time.

b) Interest remittable on interest bearing bills shall be subject to the directive of

Reserve Bank of India in this regard.

3.3. Crystallisation of Import Bill under Letters of Credit.

Unpaid foreign currency import bills drawn under letters of credit shall be crystallized
as per the stated policy of the bank in this respect
Rule 4
Clean Instruments:

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4.1 Outward Remittance Outward remittance shall be effected at TT selling rate of the
bank ruling on that date or at the Fx contract rate.
4.2 Encashment or Sale of foreign currency notes and instruments Foreign currency
travelers’ cheques, currency notes, foreign currency in prepaid card, debit/credit card
will be encashed or sold at Authorised Dealer’s option at the appropriate buying or
selling rate respectively ruling on the date and time of encashment or sale.
4.3 Payment of foreign inward remittance Foreign currency remittance up to certain
amount, as per uniform policy of respective bank, may be converted immediately, for
their own customer in to Indian Rupee if all information required for crediting the
remittance to beneficiary account is available and there is no instruction to the
contrary. Remittance in excess to such certain amount shall be executed in foreign
currency or can be converted to other currency/(ies) with due intimation to or consent
from, the beneficiary.
4.4 The applicable exchange rate for conversion of the foreign currency inward
remittance shall be TT buying rate or the contracted rate as the case may be.

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4.5 Compensation for delayed payment Authorised Dealers shall pay or send
intimation, as the case may be, to the beneficiary in two working days from the date of
receipt of credit advice / Nostro statement. On receipt of disposal instruction
22 1
08
complying with guidelines, required documents from the beneficiary the Bank shall
/20 57
transfer funds for the credit of beneficiary’s account immediately but not exceeding
two business days from date of such receipt. In case of delay, the bank shall pay the
beneficiary interest @ 2% over its savings bank interest rate. The bank shall also pay
/11 89

compensation for adverse movement of exchange rate, if any, as per its compensation
policy specifying the reference rate and date applicable for calculating such exchange
loss. In case, the beneficiary does not respond within five working days from receipt of
07 51

credit intimation as above and the bank does not return the remittance to the
remitting bank, the bank shall initiate action to crystallize the remittance;
a. Bank notify due action to the remitting bank and the beneficiary
b. Bank shall crystallize the remittance within certain period as per their policy, not
exceeding the time allowed for surrendering of foreign currency under any Stature or
Regulation or RBI Directions.
Rule 5 Foreign Exchange Contracts
5.1. Contract amounts
Exchange contracts shall be for definite amounts and periods.
When a bill contract mentions more than one rate for bills of different deliveries,
the contract must state the amount and delivery against each such rate.
5.2. Option period of delivery
Unless the date of delivery is fixed and indicated in the contract, the option period may
be specified at the discretion of the customer subject to the condition that such option
period of delivery shall not extend beyond one month.
If the fixed date of delivery or the last date of delivery option is a known holiday; the
last date for delivery shall be the preceding working day.
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In case of suddenly declared holidays, the contract shall be deliverable on the next
working day.
Contracts permitting option of delivery must state the first & last dates of delivery.
For Example: 18th January to 17th February, 31st January to 29th Feb. 2012.
“Ready” or “Cash” merchant contract shall be deliverable on the same day.
“Value next day” contract shall be deliverable on the working day immediately
succeeding the contract date.
A spot contract shall be deliverable on second succeeding working day following the
contract date.
A forward contract is a contract deliverable at a future date, duration of the contract
being computed from spot value date at the time of transaction”.
5.3. Place of delivery

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All contracts shall be understood to read “to be delivered or paid for at the Bank” and
“at the named place”.
5.4. Date of delivery
22 1
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Date of delivery under forward contracts shall be :
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1. i) In case of bills/documents negotiated, purchased or discounted – the date of
negotiation/purchase/ discount and payment of Rupees to the customer.
/11 89

However, in case the documents are submitted earlier to, or later than the original
delivery date, or for a different usance, the bank may treat it as proper delivery,
07 51

provided there is no change in the expected date of realisation of foreign currency

calculated at the time of booking of the contract. No early realisation or late delivery
charges shall be recovered in such cases.

1. ii) In case of export bills/documents sent for collection – date of payment of Rupees
to the customer on realisation of the bills.

iii) In case of retirement/crystallisation of import bills/documents – the date of

retirement/ crystallisation of liability, whichever is earlier.
5.5. Option of delivery
In all forward merchant contracts, except NDDC, the merchant, whether a buyer or a
seller, will have the option of delivery.
5.6. Option of usance
The merchant purchase contract should state the tenor of the bills/documents.
Acceptance of delivery of bills/documents drawn for a different tenor will be at the
discretion of the bank.
5.7. Merchant quotations

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The exchange rate shall be quoted in direct terms i.e. so many Rupees and
Paise for 1 unit or 100 units of foreign currency.
5.8. Rounding off Rupee equivalent of the foreign currency
Settlement of all merchant transactions shall be effected on the principle of rounding
off the Rupee amounts to the nearest whole Rupee i.e. without paise.
RULE 6 Early Delivery, Extension and Cancellation of Foreign Exchange
Contracts
6.1. General

1. i) At the request of a customer, unless stated to the contrary in the provisions of

FEMA, 1999, it is optional for a bank to:

1. Accept or give early delivery; or b. Extend the contract.

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2. ii) It is the responsibility of a customer to effect delivery or request the bank for
extension / cancellation as the case may be, on or before the maturity date of the
contract. 22 1
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/20 57
6.2. Early delivery
If a bank accepts or gives early delivery, the bank shall recover/pay swap difference, if
any.
/11 89

6.3. Extension
07 51

Foreign exchange contracts where extension is sought by the customers shall be

cancelled (at an appropriate selling or buying rate as on the date of cancellation) and
rebooked simultaneously only at the current rate of exchange. The difference between
the contracted rate, and the rate at which the contract is cancelled, shall be recovered
from/paid to the customer at the time of extension. Such request for extension shall
be made on or before the maturity date of the contract.
6.4. Cancellation

i) In case of cancellation of a contract at the request of a customer, (the request shall

be made on or before the maturity date) the Authorised Dealer shall recover/ pay, as
the case may be, the difference between the contracted rate and the rate at which the
cancellation is effected. The recovery/payment of exchange difference on cancellation
of forward contracts before the maturity date may be either upfront or back-ended at
the discretion of banks.

ii) Rate at which cancellation is to be effected:

1. Purchase contracts shall be cancelled at T.T. selling rate of the contracting

Authorised Dealer

International Banking Page 142

1. Sale contracts shall be cancelled at T.T. buying rate of the contracting

Authorised Dealer

1. Where the contract is cancelled before maturity, the appropriate forward T.T. rate
shall be applied.

iii) Notwithstanding the fact that the exchange contract between the customer and the
bank becomes impossible of performance, for whatever reason, including Government
prohibitory orders, the exchange contract shall not be deemed to have become void
and the customer shall forthwith apply to the Authorised Dealer for cancellation, as
per the provisions of paragraph 6.4.(i) and (iii) above.
iv) a. In the absence of any instructions from the customer, vide para 6.1(ii), a contract
which has matured shall be cancelled by the bank within the period of not exceeding
three working day after the maturity date, as per the policy of the respective bank.

:23
b. Swap cost, if any, shall be recovered from the customer under advice to him.
c. For contract cancelled after the maturity date [refer Para (a) above], the customer
shall not be entitled to the exchange difference, if any, in favour of the customer, since
22 1
08
the contract is cancelled on account of default on the part of customer. Customer
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shall, however, be liable to pay the exchange difference, against him. Banks may pass
the exchange gain provided it is satisfied that the contract became overdue as client
could not give cancellation instructions on account of factors which were beyond the
/11 89

control of the client. Such instances along with specific justification, shall be kept on
record by the Bank.
6.5. Swap cost/gain
07 51

i) In all cases of early delivery of a contract, swap cost shall be recovered from the
customer, irrespective of whether an actual swap is made or not. Such recoveries
should be made either back-ended or upfront at discretion of the bank.

ii) Payment of swap gain to a customer shall be made at the end of the swap period.

6.6 Outlay and Inflow of funds

Authorised Dealer shall recover interest on outlay of funds for the purpose of
arranging the swap, in addition to the swap cost in case of early delivery of a contract.
If such a swap leads to inflow of funds, interest shall be paid to the customer. Funds
outlay / inflow shall be arrived at by taking the difference between the original
contract rate and the rate at which the swap could be arranged.
The rate of interest to be recovered / paid should be determined by banks as per their
policy in this regard.

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 Import Data Processing and Monitoring System (IDPMS)

( IBD : Foreign Exchange : 64/2020)

INTRODUCTION– IDPMS/IDIS
Reserve Bank of India (RBI) has put in place a robust and effective IT based system called
Import Data Processing and Monitoring System (IDPMS) on the lines of existing Export
Data Processing and Monitoring System (EDPMS) to facilitate efficient processing of all
import transactions and effective monitoring there of IDPMS went live with effect from
October 10, 2016. Starting October 10, 2016 all transactions started flowing to IDPMS on
daily basis for AD banks, to log all subsequent activities and monitor the import
transactions. All import remittances outstanding as on this notified date were also uploaded
in IDPMS. The features of the system are as follows:

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i. All the payments including advance outward remittances made by AD
banks for import of goods are reported to RBI. This is the base for import
follow up procedure to monitor the outstanding payments.
22 1
08
/20 57
ii. Bill of Entry (BOE) data (evidence for goods imported in a country)
captured at Customs / SEZ is transmitted to RBI‟s secured server. The
same is segregated bank wise based on the AD code declared by the
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importer in BOE and shared with the respective banks for subsequent
follow up.
07 51

iii. The banks have to then report BOE settlement against the outward
remittance made and mark off the BOE and outward remittances.

iv. In order to facilitate outward remittance by any bank other than the AD
bank name in BOE, the system has additional feature of sharing details of
BOE among the banks.

v. In case of non-EDI (manual) ports, AD banks have to load the BOE data
in IDPMS based on original BOE submitted by importers. Customs share
a copy of manual BOE with respective Regional Office of RBI for
acknowledgement of data received from banks.

vi. The IDPMS is a single centralized system to monitor the outstanding

payments and outstanding imports by the banks. Banks can now follow up
with importers in case the time limit for actual imports against advance
payments or import payments against a BOE are exceeded.

International Banking Page 144

 vii. The system is universal in coverage, both in terms of (a) value of import
transactions – every single import transaction will be tracked, and (b) type
of import transaction – regardless of whether a transaction begins with an
advance remittance to supplier or, by a Bill of Entry update in the system
by Customs evidencing shipment arrival for which payment is required to
be made within stipulated period.

Therefore, the new system monitors (a) outstanding payment against which the import has
not taken place and/ or the Importer has not submitted the evidence of Import i.e Bill of
Entry (BOE) (b) outstanding import transactions for which payments are not affected. Bank
introduced an interface/utility called Import Data Interfacing System (IDIS) to meet the
reporting requirements of the system (link available at FINACLE Home Page as „I-EDIS‟).
IDIS serves as an interface between RBI‟s IDPMS and Bank‟s CBS Finacle. IDIS maintains
and manages all the import related transactions pertaining to the Bank for further reporting
to RBI. AD Branches have to follow up with importers for completion of the import
transactions and, therefore, AD Branches shall take immediate steps for

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rectification/validation of errors in respect of failed transactions in IDIS on daily
basis.

22 1
Bank has designated Trade Finance Center (TFC), New Delhi as the Nodal Office for this

08
new [Link] is responsible to download Master Data Files/XML Files from IDPMS and
/20 57
to upload Bank‟s responses to IDPMS. It will upload the Passed and Failed
acknowledgement file(s) generated from IDPMS into IDIS and will follow-up/ monitor with
AD branches for corrections/ validations in respect of failed transactions. TFC will create
/11 89

and maintain User IDs and Password for all AD Branches/Circle Offices/Zonal [Link]
may be contacted through telephone at 011 – 23320743& 011-40367420 and through
07 51

e-mail at edpms@[Link] and cbotfebrc@[Link].

On similar lines, primary import transaction data (i.e. Bill Of Entry) from Customs and SEZ
with effect from April 1, 2016 and June 1, 2016 respectively relating to our Bank is
available to AD Branches in the IDIS database for further processing. All import remittances
outstanding as on October 10, 2016 (i.e. where evidence of import has not been submitted
by the importer and/or not entered in CBS Finacle through old menu option „INBOEM‟) and
all import remittances starting October 10, 2016 are available to AD Branches in the IDIS
for follow-up and settlement of transactions.

Export Data Processing and Monitoring System (EDPMS)

SCHEME EXPORT DATA PROCESSING AND MONITORING SYSTEM

(EDPMS)

CIRCULAR FOREIGN EXCHANGE CIRCULAR No. 68/2020

International Banking Page 145

 NO
Purpose Effective monitoring and follow- up of the exports transactions

Nodal Office Trade Finance Centre (TFC), New Delhi

Responsibili TFC is responsible to download Master Data Files/XML Files from

ty of Nodal EDPMS and to upload Bank’s responses to EDPMS. It will upload
Office the Passed and Failed acknowledgement file(s) generated from
EDPMS into EDIS and will follow-up/ monitor with AD branches for
corrections/ validations in respect of failed transactions. TFC will
create and maintain User ID and Password for all AD branches. TFC
may be contacted through telephone at 011-23320743 and through
e-mail at edpms@[Link].

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Introduction An interface/utility called Export Data Interfacing System (EDIS) to
meet the reporting requirements of the system (link available in
22 1
08
FINACLE Home Page). EDIS maintains and manages all the export
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bill data processes and bill events pertaining to the Bank for further
reporting to RBI on a real time basis
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Portal I. Filling Returns and Generating Reports

07 51

useful for
II. Follow-up of Shipping Bills

III. Follow-up of Inward Remittances received against Export

IV. Reconciliation of Failed Transactions

Important All branches are advised to enter correct IEC in CBS Finacle to
Point avoid any undue delay in release of funds

Miscellaneous Topics
TRADE FINANCE REDEFINED PORTAL
(IBD Foreign Exchange Circular No.19/2022 dated 20.04.2022)

“Trade Finance Redefined Portal” (link is available at [Link] under Tab Products >>

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International) which facilitates the customer to initiate and submit trade transaction request
online for processing by the Bank. Phase-I of the portal covered Export bills module.

Following modules have also been added and made live in the portal i.e. Import Bills, Foreign
Letter of Credit (FLCs) & Foreign Letter of Guarantees (FLGs). All AD branches to popularize
the product and on-board the maximum customers on this portal. TFC Delhi will guide the AD
branches, other TFCs and customers for this portal.

EXTERNAL COMMERCIAL BORROWINGS AND TRADE CREDIT

(IBD Foreign Exchange Control Circular No.71/2022)

Transactions on account of External Commercial Borrowings (ECB) and Trade Credit (TC) are
governed by clause (d) of sub-section 3 of section 6 of the Foreign Exchange Management Act,
1999 (FEMA). Various provisions in respect of these two types of borrowing are included in the
following Regulations framed under FEMA:

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i. Foreign Exchange Management (Borrowing and Lending) Regulations, 2018,
notified vide Notification No. FEMA 3R/2018-RB dated December 17, 2018,
as amended from time to time; and
ii. 22 1
Foreign Exchange Management (Guarantees) Regulations, 2000, notified

08
vide Notification No. FEMA 8/2000-RB dated May 03, 2000, as amended
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from time to time.
Reserve Bank of India also issues directions to Authorised Persons under Section 11 of the
Foreign Exchange Management Act (FEMA), 1999. These directions lay down the modalities as
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to how the foreign exchange business has to be conducted by the Authorised Persons with their
customers/constituents with a view to implementing the regulations framed.
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UPDATED Master Direction - External Commercial Borrowings, Trade Credits and Structured
Obligations RBI/FED/2018-19/67 FED Master Direction No.5/2018-19 has been issued by
Reserve Bank of India

EXTERNAL COMMERCIAL BORROWINGS

External Commercial Borrowings are commercial loans raised by eligible resident entities from
recognised non-resident entities and should conform to parameters such as minimum maturity,
permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.

TRADE CREDITS

Trade Credits (TC) refer to the credits extended by the overseas supplier, bank, financial
institution and other permitted recognised lenders for maturity, as prescribed, for imports of
capital/non-capital goods permissible under the Foreign Trade Policy of the Government of
India. Depending on the source of finance, such TCs include suppliers’ credit and buyers’ credit
from recognised lenders.

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 Brief introduction of Foreign Account Tax Compliance Act (FATCA)

What is FATCA

FATCA is tax information reporting regime, which require Financial Institution

(FIs) to identify those customers accounts who are US Tax Resident (having tax
identification number of USA) and report these A/cs periodically to U.S. through
Govt. of India. The purpose of FATCA is prevent US person from using banks and
other financial institutions outside USA to park their wealth outside U.S. and
consequently avoid U.S. taxation on income generated from such wealths. The
Govt. of India has signed IGA Model-1 under FATCA as per which the information
is to be reported to the Govt. agencies. Reporting under FATCA begins from Sept

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30, 2015 for Model 1 IGA jurisdictions and the following information is to be
reported:-

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a. All US financial accounts with an average value of USD 50,000 or more

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b. A/c holder’s name

c. Account holder’s US TIN (taxpayer identification number)

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d. Account holder’s address

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e. Account number For non-consenting account holders, a report on the

aggregate number of a/cs and balance

Time Norms for Foreign Exchange Transactions

(IBD : FOREIGN EXCHANGE: 57/2020)

Sr No Type of transactions Turn Around Time(TAT)

EXPORTS (Maximum)

1 Purchase /Discount of bills within sanctioned limit 2-3 hours

2 Disbursement of pre-shipment/post-shipment credits within 1 hour

the sanctioned limit

3 Advising export Letters of credit 1 day

4 Advising amendments/cancellations of Letters of credit 1 day

5 Negotiation of export bills drawn under Letters of credit 2-3 hours

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 subject to strict compliance of terms of L/C

6 Negotiation/Purchase/Discount of Bills presented by other 3-4 hours

banks either under restricted L/C or because of
agency/correspondent bank relationship

7 Negotiation of bills drawn under restricted L/C with Forward 3-4 hours
contract booked with customer’s bank

8 Despatch of export documents whether negotiated or on Same day

collection basis

9 Export related remittances say advance remittances or 2-3 hours

remittances of commission, quality claims etc. subject to
compliance of Exchange Control Regulations

10 Transfer of funds received from abroad against export Bills

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to the exporter's bank (for Foreign Currency Bills)

i) Where payment is to be effected in the

same branch 2-4 hours
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ii) ii) Where payment is to be effected at the
same centre but to another branch of
2-4 hours
the same bank or another Bank
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iii) iii) Where payment is to be effected to a

branch of the same bank or another 2-4 hours
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bank at outstation centre

11 Issuance of customs and other guarantees within sanctioned 1-2 hours

limit

12 a. Issuance of Foreign Inward Remittance certificate 1 day

b. Issuance of other certificates 2 days

c. Where certificates are required to be obtained from 1-2 days

another Authorised Dealer/Centre

Sr No Type of transactions Turn Around Time(TAT)

IMPORTS (Maximum)

1 Opening of import letters of credit (outstanding within 2-3 hours

sanctioned limits)

2 Advice of amendments/cancellations of import letters of 1-2 hours

credit (subject to consent of beneficiaries)

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3 Retirement of import bills under letters of credit 2-3 hours

4 Presentment of import bills for payment/acceptance 1-2 hours

5 Notification of dishonor for non-payment/non-acceptance to 1-5 days

the Negotiating Bank

6.a Issuance of customs and other guarantees within sanctioned 2-3 hours
limits

6.b Issuance of shipping guarantees 1-3 hours

7 Issuance of certificates 2 -3 hours

Sr No Type of transactions Turn Around Time(TAT)

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FORWARD CONTRACTS (Maximum)
Immediate
1 Booking of Forward Exchange Contracts
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Immediate
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2 Extension, early delivery and cancellation of Forward
Contracts subject to FEDAI Rules
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DISCRETIONARY POWERS TO PERMIT RELAXATION IN SERVICE

CHARGES PRESCRIBED FOR FOREIGN EXCHANGE
TRANSACTIONS

( IBD : Foreign Exchange : 65/2020)

The Forex transactions where 100% cash deposit to the extent of Bank’s liability is held as security,
the applicable charges will be one-fourth of normal applicable Charges. In case of any further
relaxation beyond one fourth of normal charges, the power is vested with HOCACII only.

Branches may note that proposals for relaxation in service charges falling beyond the powers of
ZOCAC covering customers who are enjoying CREDIT LIMITS (Borrowal Account) may be
forwarded for approval to Credit Approval Department, Head Office. In case of Non-Borrowal
Accounts beyond the vested powers of ZOCAC be submitted to HO: International Banking Division
on prescribed format for approval by HOCAC-I/II.

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Relaxation to be permitted by Branch Heads:

Due to intense competition with peer banks and to increase foreign exchange business, Branch Heads
have been permitted to allow relaxation as follows in foreign exchange service charges on the basis of
FOREX turnover to enable the branch to capture new business. However, these relaxations cannot be
permitted by Branch Head at Branches where Circle Heads & above have already allowed relaxations
within their vested powers:-
FOREX Turnover of last financial year Relaxation permitted to all
Sr Importers/Exporters
No

Rs.5 Crore upto Rs.10 Crore 5 % of prescribed charges

1

Above Rs.10 Crore upto Rs. 25 Crore 10 % of prescribed charges

2

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Above Rs.25 Crore 15 % of prescribed charges
3

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Relaxations to be permitted by other than Branch Heads:
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Authority Relaxations permitted to all Importers/Exporters

Sr No (Including borrower with risk rating of „B1” and above.
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COCAC and Branch Upto 25% of prescribed charges

1 Head of LCBs

ZOCAC Upto 50% of prescribed charges

2

HOCAC-I Upto 75% of prescribed charges

3

HOCAC-II & above

Full Powers

The aforesaid discretionary powers are to be exercised by the authorities only in respect of proposals
falling up to their vested powers and these powers are not to be exercised in respect of proposals
falling under the powers of higher authorities i.e. beyond their vested power. However, ED and MD &
CEO can permit concessions in service charges, up to the extent of relaxations, which can be
permitted by them, even in case of sanctions of Management Committee.

EMPANELMENT OF CREDIT RATING AGENCIES FOR DRAWING CIRS

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 (IBD : AGENCY: 17/2020)

Credit rating agencies help the banks to determine whether to lend or extend credit to an
individual or business, by predicting the likelihood that the borrower will repay the debt in a
timely manner.

Broadly the Credit reports contain the following information:-

a. Ownership and Management: Names of directors, shareholders or proprietor, Capital

structure and shareholdings, Names and job titles of senior company personnel, etc.

b. Legal Status And History: Date of establishment or incorporation with Company

Registration Number, Legal status, registration number and trading style, Registered
address, Affiliated companies, Historical information, change of ownerships, etc.

c. Operations: Full details of business activities, Description of premises, Number of

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employees, etc.

d. Financial Information: Extracts from full balance sheets (if available) obtained from
official registries or directly from the company, registered mortgages and charges, Bankers
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08
Name and Address, etc.
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e. Credit Appraisal And Conclusion: An opinion based on the payment experience of
trade suppliers, bank, known public record, details of any court action and protested bills,
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suppliers and customer’s feedback wherever possible.

For the convenience of branches, 5 Credit Rating agencies are empanelled by the Bank for
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obtaining Credit information reports. The list of the Credit Rating Agencies is given here
under:

Sr No Name of the Agency Validity of Empanelment

1 M/s Mira Inform Private Limited 31.12.2021

2 M/s Dun & Bradstreet Information Services India 30.09.2021

Pvt Ltd

3 M/s Unified Credit Solutions Pvt Ltd 31.12.2021

4 M/s MNS Credit Information Management Group 30.09.2022

Ltd

5 M/s Experian Services India (P) Ltd. 31.12.2020

M/s Mira Inform Private Limited:

(Amount in INR)

For USA & Canada For European Countries For Rest of the world

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2650* 1700-4300* 1500-5300*

*GST not Included

M/S DUN & BRADSTREET INFORMATION SERVICES INDIA PVT. LTD.

( Prices in INR)

Name of the Countries Price per GST @ 18% Price per

region report report
inclusive of
taxes

Region 1 USA/Canada 2650 477 3127

Region 2 Europe/Latin 3300 594 3894

America/Africa

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Region 3 Middle East 5500 990 6490
and Asia
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08
Pacific
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Domestic India 5000 900 5900
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M/s UNIFIED CREDIT SOLUTIONS [Link]:

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Price (INR) (Exclusive of Service Tax)

Region / Country Price (INR) (Exclusive of Service Tax)

USA 2500

EUROPE 2500-3500

UK 2500

Rest of the World 1500-5000

M/s Experian Services India (P) Ltd.

Region / Country Price (INR) (Exclusive of Service Tax)

USA & Canada 2350

UK 3000

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EUROPE 3000

Rest of the World 4900

M/S MNS CREDIT MANAGEMENT GROUP (P) LTD.:

Region/country Price (INR) (Exclusive of Service Tax)

USA 2500

Europe( Belgium, Finland, France, Germany, 2000

Ireland, Netherlands, Norway, Spain,
Sweden, Switzerland & UK)

Rest of Europe 3000

Asia Pacific, Latin America, Middle East 4000

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Rest of the World 5000

India 22 1 850/-(Ltd/Pvt. Ltd Co.)

08
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1250/-(Proprietor /Partnership Entities)
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International Banking Page 154

 Recent Changes during last weeks
ECGC-RENEWAL OF ECIB-WTPC & WTPS FOR FY 2022-23 (IBD: FOREIGN EXCHANGE
CIRCULAR NO. 70/2022 dated 27-10-2022)

REVISION OF FOREIGN CURRENCY NOTIONAL RATES (IBD Foreign Exchange

Circular No. 67/2022 dated 11.10.2022)

EXPORT DATA PROCESSING AND MONITORING SYSTEM (EDPMS) –

GUIDELINES/SOP FOR CAUTION/DE-CAUTION LISTING OF EXPORTERS (IBD Foreign
Exchange Circular No. 69/2022 dated 11.10.2022)

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