IMP0RT OF GOODS & SERVICES

The objective of this topic is to facilitate the understanding of the exchange and trade control guideline
that are applicable to the importers, as also various facilities available to them – both Credit and Non-
credit facilities.
Section I: Introduction: In our country, import trade is regulated by Director General of Foreign Trade
(DGFT), which functions under the Ministry of Commerce, Government of India. The policies and
procedures required to be followed for import trade are announced by DGFT. But financing of import
trade and facilities granted under Foreign Exchange Management Act (FEMA) are governed by Reserve
Bank of India (RBI) regulations / guidelines.
Exchange control regulations as well as exports and import trade control regulations are applicable to
all transactions related to international trade. RBI, with powers delegated under FEMA 1999, regulates
the exchange control and receipts as well as payments of foreign exchange part through various
guidelines/FEMA amendments, while the office of DGFT regulates trade control part through the
Foreign Trade Policy (FTP) with suitable/periodic amendments, in order to facilitate external trade &
payments and to develop international business of the country.
RBI also governs the broad parameters of the guidelines in financing of importers, to make finance
available to them at international level of interest rates so as to enable them to compete in the
international markets. Similarly guidelines and procedural formalities for import of goods and services,
with an aim to conserve foreign exchange on one hand and on the other hand to expand the base for
improved technology by way of import, are also covered in the FTP for imports of goods and services.
AD Category-I Banks (AD) should follow normal banking procedures and adhere to the provisions of
Uniform Customs and Practices for Documentary credits (UCPDC) while opening Letters of Credit for
import into India on behalf of their constituents. ADs also have to advise importers to comply with the
provisions of Income Tax Act, wherever applicable.
Compliance with the provisions of Research & Development Act, 1986 shall be ensured for import of
drawings and designs.
In a nutshell, it can be seen that while DGFT plays the role of regulating export/import trade functions,
RBI, under FEMA regulations/guidelines, controls the financing and exchange control part.
Any reference to RBI 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.
Needless to mention, KYC norms /AML/FATF standards are positively to be complied with before
undertaking any import transaction and related payments.
Gist of Rules and Regulations to be followed while handling import transactions and related payments
is furnished below:
Section II: General Guidelines on Imports:
1. Every person/firm/company desires to engage in Export-Import trade has to submit application to
DGFT and obtain an Importer-Exporter code number.
2. AD Category-I banks, before effecting remittance for imports into India, shall ensure that all the
requisite details are made available by the importer and the remittance is for bona fide trade
transactions as per applicable laws in force.
3. ADs are required to ensure that the goods imported or proposed to be imported are permitted one
as per the current Foreign Trade Policy. It shall be ensured that such imports do not require
licenses/approval or GOI permission or are not in the negative list.
4. In terms of Section 10(6) of FEMA 1999, any person acquiring foreign exchange is permitted to use it
either for the purpose mentioned in the declaration made by him to the AD under section 10 (5) of the
Act or to use it for any other purpose for which acquisition of foreign exchange is permissible under the
said Act or Rules or Regulations framed there under.
5. Where forex has been acquired for import of goods into India, AD bank should ensure that the
importer furnishes evidence of import (as explained elsewhere in this note), such as Exchange Control
copy of the Bill of Entry/Postal Appraisal Form/Customs Assessment Certificate etc. and satisfy himself
that goods equivalent to the value of remittance have been imported.
Notwithstanding anything contained in the Manner of Payment in foreign exchange (for details refer to:
FEMA 14R/2016-RB dated 02nd May 2016), a person resident in India may make payment for import of
goods in foreign exchange through an international card held by him /in rupees from international
credit card/debit card through the credit/debit card servicing bank in India against the charge slip signed
by the importer or as prescribed by RBI from time to time, provided the transaction is in conformity
with the extant provisions and in conformity with the FTP in force.
6. Any person resident in India may also make payment in rupees – (a) towards meeting expenses on
account of boarding, lodging & services related thereto or travel to and from and within India of a
person resident outside India who is on a visit to India; (b) by means of a crossed cheque/draft as
consideration for purchase of gold/silver in any form imported by such person in accordance with the
terms & conditions stipulated by RBI/FTP/GOI from time to time and (iii) a company/a resident in India
may make payment in rupees to its non-whole time director who is resident outside India and is on a
visit to India for the company’s work and is entitled to payment of sitting
fees/commission/remuneration and travel expenses to and from and within India, in accordance with
the provisions contained in the company’s Memorandum/Articles of Association or in any agreement
entered into it, subject to compliance of extant norms in this regard for making such payments to him.
7. Normally the remittances against imports should be completed not later than six months from the
date of shipment. If the payment is to be made on deferred payment arrangement (payments beyond a
period of six months from the date of shipment, less than five years), then it will be treated as ‘Trade
Credit’. @@@@@@@@@@@@@@@@@
Trade Credit: Trade Credit (TC) refers to credits extended by the overseas supplier, bank and financial
institution for maturity up to five years for imports into India. Depending on the source of finance, such
trade credits can be classified as ‘Suppliers’ Credit’ or ‘Buyer’s Credit’.
Supplier’s credit relates to credit for imports into India extended by the overseas supplier, while Buyer’s
credit refers to loans for payment of imports into India arranged by the importer from a bank or
financial institution outside India. Imports should be as permissible under the extant FTP of the DGFT.
Rules and Regulations governing Trade Credit are furnished below:
Automatic Route:
i) AD banks are permitted to approve trade credits for import of non-capital goods into India up to USD
20 million or equivalent per import transaction for imports permissible under the current FTP of the
DGFT with a maturity period of one year from the date of shipment or operating cycle, whichever is
less. For import of capital goods, ADs can approve trade credits up to USD 20 million per import
transaction with a maturity period up to five years from the date of shipment. For trade credits up to
five years, the ab-initio contract period should be 6 months.
No roll-over/extension will be allowed beyond the permissible period.
ii) Issue of guarantees: AD banks are permitted to issue Letters of Credit/Guarantees/Letter of
Undertaking (LOU)/ Letter of Comfort in favour of overseas supplier /bank / financial institution up to
US Dollar 20 million per import transaction for a period up to one year for import of all non-capital
goods permissible under the FTP (except gold, palladium, platinum, rhodium, silver etc..) and up to
three years for import of capital goods, subject to prudential guidelines issued by RBI from time to time.
The period of such Letter of credit /Guarantee/ LOU/LOC has to be co-terminus with the period of
credit, reckoned from the date of shipment. AD banks are not permitted to issue LC / Guarantees /
LOC / LOU in favour of overseas supplier, bank or financial institution for the extended period beyond
three years.
iii) All-in-cost Ceilings. The existing all-in-cost ceilings are:
Maturity period All-in-cost ceilings over 6 months LIBOR@
->Up to 1 year }
->More than 1year and up to 3 Years { 350 basis points
->More than 3 years & up to 5 years }
--------------------------------------------------------------------------------------------------------------------------------------
@ for the respective currency of credit or applicable bench mark.
The all-in-cost ceilings include arranger fee, upfront fee, management fee, handling/processing charges,
out of pocket and legal expenses, if any.
v) Reporting to RBI. AD banks have to submit details of approvals, drawal, utilisation and repayment of
trade credit granted by all its branches, in a consolidated statement in Form TC to the Central Office of
th
RBI so as to reach at their end not later than 10 of the following month. Each trade credit shall be
given a unique identification number by the AD bank.
Data on issuance of LCs/Guarantees/LOUs/LOCs by all its branches are to be submitted by AD banks in a
consolidated statement at quarterly intervals to the central office of RBI, so as to reach them not later
than 10th of the following month.
Please refer to RBI Master Direction No. 5/2015-16 dated 01st January 2016 on ‘External Commercial
Borrowings & Trade Credits’ (Part III) for further details.
Remittances against import of books can be allowed without restriction as to the time limit, provided
overdue interest, if any, on delayed payments for a period of less than three years from the date of
shipment is at the rate prescribed for trade credit from time to time.
7. Extension of time: AD banks can grant extension of time for settlement of import dues up to a period
of 6 months at a time (maximum up to the period of 3 years) irrespective of the invoice value for delays
on account of disputes or on account of quality/quantity or non-fulfillment of terms of
contract/financial difficulties and cases where importer has filed suit against the seller. Cases where
sector specific guidelines have been issued by RBI for extension of time (rough, cut & polished
diamonds), then the same shall be followed by AD banks.
While granting extension of time, AD banks must ensure that – (a) the import transactions covered by
the invoices are not under investigation by Directorate of Enforcement/CBI or other investigating
agencies; (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% of the average import
remittances during the preceding two financial years, whichever is lower and (c) where extension has
been granted by the AD banks, the date up to which extension has been granted shall be indicated in
the “Remarks” column.
Cases not covered by the above instructions/beyond the above limits shall be referred to the concerned
RO of RBI.
The above shall be reported in IDPMS as per message ‘Bill of Entry Extension’ and the date up to which
extension is granted shall be indicated in ‘Extension date’ column.
8. Import of Foreign Exchange/Indian rupees: Import of foreign currency, including cheques, is
governed by clause (g) of sub- section (3) of Section 6 of FEMA, 1999 & Foreign Exchange Management
(Export and Import of Currency) Regulations 2000, issued by RBI, vide Notification No. FEMA 6(R)/2015-
RB dated 29th December 2015, as amended from time to time.
A person can send into India without limit foreign exchange in any form other than currency notes, bank
notes and travellers’ cheques.
A person can bring into India from any place outside India, without limit foreign exchange (other than
unissued notes) subject to the condition that on arrival in India he makes a declaration to the Custom
Authorities at the Airport in the Currency Declaration Form (CDF) where the aggregate value of foreign
exchange brought in by him at any one time in the form of currency notes/bank notes/travellers
cheques exceeds USD 10,000 or its equivalent OR the aggregate value of foreign currency notes alone
(cash portion) brought in by him at any one time exceeds USD 5000 or its equivalent.
Any person resident in India, who had gone out of India on a temporary visit, may bring into India at
the time of his return from any place outside India (other than from Nepal and Bhutan) currency notes
of GOI and RBI notes up to an amount not exceeding Rs 25,000 per person.
A person may bring into India from Nepal or Bhutan, currency notes of GOI and RBI notes other than
denominations of above Rs.100 in either case.
10. Third party payment for Import Transactions: AD banks are allowed to make payments to a third
party for import of goods, subject to the following conditions:
i) A firm irrevocable purchase order/tripartite agreement should be made available. However, this can
be waived if the importer produces documentary evidence for circumstances leading to third party
payments/name of third party being mentioned in the irrevocable order/invoice.
ii) AD bank should be satisfied with the bona fides of the transactions and should consider FATF
statements before handling the transactions.
iii) The invoice should contain a narration that the related payment has to be made to the third party
named therein.
iv) Bill of Entry should show the name of the shipper as also the narration that the related payment has
to be made to the third party named therein and
v) Importer should comply with the related extant instructions relating to imports including those on
advance payment being made for import of goods.
11. Issue of Guarantees by an AD: (i)An AD may give a guarantee in respect of any debt, obligation or
any other liability incurred by a person resident in India and owned to a person outside India, as an
importer, in respect of import on deferred payment terms in accordance with the approval by RBI for
import on such terms. (ii) An AD may give guarantee/LOU/LOC in respect of any debt/obligation/other
liability incurred by a person resident in India and owned to a person resident outside India (being an
overseas supplier of goods/bank/financial institution) for import of goods, as permitted under the FTP
announced by Govt of India from time to time and subject to the conditions stipulated by RBI from time
to time. (iii) An AD may, in the ordinary course of business, give a guarantee in favour of non-resident
service provider, on behalf of a service importer, subject to the terms stipulated by RBI from time to
time., Provided that – (a) no guarantee for an amount exceeding USD 5 lakhs or its equivalent shall be
issued on behalf of a service importer other than a Public Sector Company or a Dept/Undertaking of
Govt of India/State Government and (b) where the service importer is Public Sector
Company/Dept/Undertaking of Govt of India/State Government, no guarantee for an amount exceeding
USD 1 lakh or its equivalent shall be issued without the prior approval of the Ministry of Finance, Govt
of India.
An AD may, subject to the directions issued by RBI in this behalf, permit a person resident in India to
issue corporate guarantee in favour of an overseas lessor for financing import through operating lease
effected in conformity with the FTP in force and under the provisions of FEMA (Current Account
Transactions) Rules, 2000, issued by RBI under FEMA, 1999, with amendments from time to time.
Section III: Operational Guidelines for Imports.
1. Advance Remittance:
a) AD Category-I banks (ADs) may allow advance remittance for import of goods without any ceiling
subject to the following conditions:
i) If the amount of advance remittance exceeds USD 2,00,000 or its equivalent, an unconditional
irrevocable Standby LC or a Guarantee from an international bank of repute situated outside India or a
Guarantee of an AD Category-I bank in India (provided such guarantee is issued against the counter
guarantee of an international bank situated outside India) is obtained.
ii) Where the importer (other than a Public Sector Company or a Dept/Undertaking of GOI/State Govt)
is unable to obtain bank guarantee from overseas suppliers and AD Bank is satisfied about the track
record and bona fides of the importer, the requirement of BG/Standby LC need not be insisted upon for
advance remittance up to USD 5 Million or its equivalent.
iii) If a Public Sector Company/a Dept/Undertaking of GOI/State Govt is not in a position to obtain a
guarantee from an international bank of repute against an advance payment, a specific waiver for BG is
to be obtained from the Ministry of Finance, GOI before making advance remittance exceeding USD
100,000 or its equivalent.
iv) All payments towards advance remittance for imports shall be subject to the specific conditions and
AD banks have to create Outward Remittance Message (ORM) for all such outward remittances in
IDPMS.
b) Advance remittance for import of Rough Diamonds: AD banks are permitted to allow advance
remittance by an importer (other than a Public Sector Company / Dept / Undertaking of GOI / State
Govt) for import of rough diamonds into India from overseas mining companies (refer to RBI Master
Circular dated 01st January 2016 on Imports of Goods and Services for details) without any limit/ BG or
Standby LC, subject to compliance of the terms and conditions stipulated in the above Master Direction.
Advance payments should be made strictly as per the terms of the sale contract and should be made
directly to the account of the company concerned, that is to the ultimate beneficiary and not through
numbered accounts or otherwise and AD banks should create ORM for all such outward remittances in
IDPMS.
Due caution shall be exercised to ensure that remittance is not allowed for import of conflict diamonds
(Kimberly Certification).
In the case of Public Sector Company /Dept / Undertaking of GOI / State Govt, AD banks can permit
advance remittance subject to conditions stipulated in the Master Direction and obtention of a specific
waiver of BG from Ministry of Finance, where the advance payment is equivalent to or exceeds USD
One Lakh.
Based on the AD code declared by the importer, the banks shall download the Bill of Entry (BOE) issued
by EDI ports from ‘BOE Mater’ in IDPMS. For non-EDI ports, AD banks of the importer shall upload BOE
data in IDPMS as per message format ‘Manual BOE reporting’ on daily basis on receipt of BOE from the
customer/Customs office.
AD banks shall enter BOE details and mark off ORMs as per the message format ‘BOE Settlement’.
In case of payment after receipt of BOE, the AD bank shall generate ORM for import payments made by
the importer as per the message format ‘BOE Settlement’.
Multiple ORMs can be settled against single BOE and also multiple BOEs can be settled against one
ORM.
Instructions for effecting Advance remittance for import of Aircrafts/Helicopters and other Aviation
related purchases, AD banks are required to follow the conditions laid down in the RBI Master
st
Direction No. 17/2015-16 dated 01 January 2016 on 'Imports of goods and Services'.
Concerned AD banks shall generation of ORMS, BOE entries and BOE settlement with the respective
ORMs as per extant IDPMS guidelines.
c) Advance remittance for import of Services: AD banks can allow advance remittance for import of
services without any ceiling subject to the following conditions:
(i)If the amount of advance remittance 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-guarantee of bank of international repute situated
outside India) shall be obtained from the overseas beneficiary. (ii) In the case of a Public Sector
Company/a Dept/Undertaking of GOI/State Govt, approval from Ministry of Finance, GOI is necessary
for advance remittance for import of services without BG for an amount exceeding USD 100,000 or its
equivalent.
AD banks should ensure generation of ORMs and marking off in the IDPMS etc. as per extant IDPMS
guidelines.
Prior approval of RBI is required in case of any deviation from the above stipulations.
All payments towards advance remittance for imports shall be subject to the specified conditions.
AD Category-I banks should follow up to ensure that the beneficiary of advance remittance fulfills his
obligation under the contract or agreement with the remitter in India, failing which, the full amount
should be repatriated to India.
2. Interest on Import bills: ADs may allow payment of interest on usance bills or overdue interest for a
period of less than three years from the date of shipment at the rate prescribed for Trade Credit from
time to time.
In case of prepayment of usance import bills, remittance shall be made only after reducing the
proportionate interest for the unexpired portion of usance at the rate at which interest has been
claimed or LIBOR of the currency in which the goods have been invoiced, whichever is applicable.
Where interest is not separately claimed or expressly indicated, remittances may be allowed after
deducting the proportionate interest for the unexpired portion of usance at the prevailing LIBOR of the
currency of invoice.
In case of change in value due to above reasons, the concerned AD bank has to enter proper
remark/indicator for ORM mark off in IDPMS as per extant guidelines.
3. Remittances against Replacement Imports: When goods are short-supplied, damaged, short-landed
or lost in transit and the Exchange Control copy of the import license has already been utilised to cover
the opening of a LC against the original goods which have been lost, the original endorsement to the
extent of the value of lost goods can be cancelled and fresh remittance for replacement of imports can
be allowed by AD bank without reference to RBI, provided the insurance claim relating to the lost goods
has been settled in favour of the importer. It shall be ensured that the consignment being replaced is
shipped within the validity period of the license. AD banks should ensure that proper remark/indicator
is entered for ORM marks off/closure of bills in IDPMS as per extant guidelines.
4. Guarantee for Replacement Import: If replacement goods for defective import are being sent by the
overseas supplier before the defective goods imported earlier are reshipped out of India, AD banks can
issue guarantees at the request of the importer client for return of the defective goods according to
their commercial judgment.
5. Import of Equipment by Business Process Outsourcing (BPO) Companies for their overseas sites: AD
banks can allow BPO companies in India to make remittances towards the cost of equipment to be
imported and installed at their overseas sites in connection with the setting up of their inter- national
Call Centers (ICCs) subject to the following conditions:
a) The BPO Company should obtain necessary approval from the Ministry of Communications and
Information Technology, GOI and other concerned authorities for setting up the ICC.
b) AD banks can make the remittance based on their commercial judgment, the bona fides of the
transaction and strictly in terms of the contract.
c) The remittance shall be made directly to the account of the overseas supplier.
d) The AD bank shall obtain a certificate as evidence of import from the CEO or auditor of the importer
company that the goods for which remittance was made have actually been imported and installed at
the overseas site.
AD banks should ensure compliance with IDPMS guidelines as applicable.
6. Receipt of Import Bills: Concerned AD banks should ensure generation of ORMs, BOE entries and
BOE settlement with the respective ORMs in compliance with the IDPMS guidelines.
a) Receipt of import bills by the importer directly from the overseas supplier. Normally import bills
and documents should be received from the banker of the supplier by the banker of the importer in
India. Therefore AD bank should not make remittances where import bills have been received directly
by the importers from the overseas supplier, except on the following cases.
i) Where the value of the import bill does not exceed USD 300,000.
ii) Import bills received by wholly-owned Indian subsidiaries of foreign companies from their principals.
iii) Import bills received by Status Holder Exporters as defined in the Foreign Trade policy, 100% EOUs,
Units in SEZ, Public Sector Undertakings and Limited Companies.
iv) Import bills received by all limited companies, viz., public limited, deemed public limited and private
limited companies.
v) AD banks are permitted to allow remittance for imports up to USD 300,000 where the importer of
rough diamonds, rough precious & semi-precious stones have received the import bills directly from the
overseas supplier and the documentary evidence for import is submitted by the importer at the time of
remittance subject to the above conditions.
It shall be noted that the import would be subject to the prevalent FTP. The ADS should exercise their
commercial judgment and satisfy themselves with respect to the bona fides of the transactions. AD
Banks should do KYC and due diligence exercise and should be fully satisfied about the financial standing
/ status and track record of the importer customers. 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.
b) Receipt of import documents by AD bank directly from overseas suppliers. At the request of
importer clients ADs may receive bills directly from the overseas supplier, provided the AD is fully
satisfied about the financial standing/status and track record of the importer customer. However, the
AD bank should obtain a report on the buyer from a reputed agency, where the value of the import bill
exceeds USD 3 lakh.
7. Evidence of Import:
a) 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 bank through whom the relative remittance
was made to ensure that – (a) the importer submits BOE number, port code and date for making
evidence of import under IDPMS as detailed below elsewhere (b) 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 BOE 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 (c) for goods imported and stored in Free Trade
Warehousing Zone (FTWZ) or SEZ Unit warehouses or Customs bonded warehouses, the Exchange
Control copy of the Ex-bond BOE or BOE issued by Customs Authorities by any other similar
nomenclature shall submit applicable BOE number, port code and date for marking evidence of import
under IDPMS as detailed below elsewhere.
In case of imports on DA basis, AD 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.., ADs can, if satisfied with the genuineness of request, allow reasonable time, not
exceeding three months from the date of remittance to the importer to submit evidence of import.
AD banks have to create ORM for all such outward remittances irrespective of value and shall perform
the subsequent activity, such as document submission, outward remittance data, matching with ORM,
closing of transactions etc. as per IDPMS guidelines.
b) Evidence of import in lieu of Bill of Entry. ADs can accept a certificate from the CEO or Auditor of the
company that the goods for which remittance was made have actually been imported into India, in lieu
of Bill of Entry for home consumption, provided the amount of foreign exchange remitted is less than
USD 10,00,000 or its equivalent, the importer is a company listed on a stock exchange in India with a
net worth of not less than Rs 100crores as on the date of its last audited balance sheet or the
importer is a public sector company or an undertaking of GOI or its Departments.
The above facility can be extended to autonomous bodies, including scientific bodies / academic
institutions whose accounts are audited by CAG of India. ADs may insist on a declaration from the
Auditor/CEO of such institutions that their accounts are audited by CAG.
ORM has to be created and BOE has to be downloaded from ‘BOE Master’ in IDPMS in the case of EDI
ports. In the case of non-EDI ports, duplicate copy/customs certified copy has to be submitted or BOE
waiver obtained from RBI.
c) Non Physical imports. When imports are made in non-physical form (software or data through
internet/datacom channels and drawings and designs through email/fax), a certificate issued by a
Chartered Accountant certifying that the software/data/drawings/design have been received by the
importer shall be obtained. Importers should be advised by AD banks to keep Customs Authorities
informed of the imports made by them under this clause.
8. Operational procedures for IDPMS: AD banks are required to create ORM for all outward
remittances for import payments on behalf of their importer customer for which the prescribed
documents for evidence of import have not been submitted (applicable to imports prior to IDPMS
implementation).
Settlement of ORM with BOE:
(a)Based on the AD Code declared by the importer, the banks shall download the BOE issued by EDI
ports from ‘BOE Master’ in IDPMS. For non-EDI ports, AD bank of the importer shall upload the BOE
data in IDPMS as per message format ‘Manual BOE reporting’ on daily basis on receipt of BOE from the
customer/customs office.
(b) In order to enhance the ease of doing business and reduce transaction costs, submission of hard
copy of Exchange control copy of BOE has been discontinued effective from 01st December 2016, as the
same is available in IDPMS. The revised procedure is as follows.
AD banks have to enter BOE details (BOE number, port code & date) for ORM associated with the
advance payments for import transactions as per the message format ‘BOE Settlement’. In case of
payment after receipt of BOE, the AD bank has to generate ORM for import payments made by its
importer customer as per the message format ‘BOE Settlement’. It may be noted that multiple ORMs
can be settled against single BOE and also multiple BOE can be settled against one ORM.
(c) On settlement of ORM with evidence of import, AD banks have to issue an acknowledgement slip to
the importer containing the following details.
Importer’s full name & address with code number; number & date of BOE and the amount of import
and a recap advice on number and amount of BOE & ORM not settled for the importer.
The importer has to preserve the printed ‘importer copy of BOE’ as evidence of import and
acknowledgement slip for future use.
Extension and Write Off:
(a) AD banks are allowed to give extension for submission of BOE beyond the prescribed period in
terms of the extant guidelines on the matter, which has to be reported in IDPMS as per the
message ‘Bill of Entry Extension’ and the date up to which extension is granted will have to be
indicated in ‘Extension date’ column.
(b) AD banks can permit closure of BOE/ORM in IDPMS that involves write off to the extent of 5%
of the invoice value in cases where the amount declared in BOE varies from the actual
remittance due to operational reasons and AD bank is satisfied with the reasons submitted by
the importer.
(c) AD banks can close the BOE for such import transactions where write off is on account of
quality issues/short shipment/ destruction of goods by the port or customs or health authorities
in terms of extant guidelines on the matter subject to submission of satisfactory documentation
by the importer irrespective of the amount involved. AD bank has to settle and close BOE/ORM
with appropriate ‘Adjustment Indicator’ in IDPMS.
The above operational guidelines for extension and write off are meant to facilitate closure of bills in
IDPMS and will be subject to extant guidelines on the matter and not absolve the importer from
remitting/receiving the amount in case of change in circumstances.
(d) While allowing write off, AD banks must ensure that the case is not the subject matter of any
pending civil or criminal suit and the importer has not come to the adverse notice of the
Enforcement Directorate/CBI/any other law enforcement agencies.
There should be a system in place under which internal inspectors/auditors of AD banks (including
external auditors) to carry out random sample check/percentage check of write off of import bills.
Extension and write off cases not covered by the extant guidelines shall be referred to the concerned
RO of RBI for necessary approval.
Follow-up for Evidence of import: AD banks shall follow up for outward remittance made for import
(unsettled ORM) in terms extant guidelines on the matter. In cases where relevant evidence of import
data is not available in IDPMS on due dates against the ORMs, AD bank shall follow up with the
importer for submission of documentary evidence of import. Similarly if BOE data is not settled against
ORM within the prescribed period, AD banks shall follow up with the importer in terms of extant
instructions.
e) Verification and preservation. Internal Inspectors/Auditors (including external auditors appointed by
AD bank) should carry out verification and IS Audit and assurance of the ‘BOE Settlement’. ADs have to
preserve the data and process followed for ‘BOE Settlement’ in terms of the guidelines under Cyber
Security framework in the bank.
Internal inspectors/auditors (including external auditors appointed by banks) should carry out
verification of the documents evidencing import other than which are available in IDPMS such as
Exchange control copies of Postal Appraisal forms, Customs Assessment certificates etc.
Documents evidencing imports into India have to be preserved by AD banks for a period of one year
from the date of their verification. Cases which are under investigation by investigation agencies,
documents, data & process shall be destroyed only after obtaining clearance from the investigating
agencies concerned.
f) Follow up for evidence of import. In case the importer does not furnish any documentary evidence of
import within three months from the date of remittance involving foreign exchange, irrespective of
value, the AD bank should rigorously follow up for the next three months, including serving registered
letter to the importer.
On operationalization of IDPMS, all outstanding import remittances, irrespective of the amount
involved, will have to be reported to the system and submission of BEF statement will be discontinued
from that date.
8. Import of Gold:
a) Import of Gold by Nominated Banks / Nominated Agencies / Entities:
i) The 20:80 scheme of import of gold was withdrawn on 28th November 2014. However, the obligation
th
to export under the 20:80 Scheme would apply to the unutilized gold imported before 28 November
2014.
ii) Nominated banks & Nominated agencies, as notified by DGFT, are permitted to import gold on
consignment basis. All sale of gold domestically will, however, be against upfront payment. Nominated
banks are free to grant gold metal loans.
iii) Star & Premier Trading Houses (STH/PTH) can import gold on DP basis as per entitlement without
any end use restrictions.
iv) Imports of gold coins and medallions are permitted. (However, prohibition on sale of gold coins and
medallions by banks continues pending further review).
HO/IBD of AD Category-I banks have to submit the following statements under XBRL system, (a) on
half yearly basis (end March & September) showing the value & quantity of gold imported by the
nominated banks/agencies/EOUs/SEZs in Gem & Jewelry Sector, mode of payment-wise and (b) on
monthly basis showing the quantity & value of gold imports by the nominated agencies (other than the
nominated banks) /EOUs/SEZs in Gem & jewelry sector during the month under report as well as the
cumulative position as at the end of the said month beginning from the 1st month of the Financial Year.
th
Both statements are to be submitted, even if it is ‘Nil’, by the 10 of the following month/half year to
which it relates.
b) Suppliers’ credit & Buyers’ credit including the usance period of LC opened For Import of Gold in any
form, including jewelry made of Precious Metals or studded with Diamonds / Precious / Semi-
precious stones, should not exceed 90 days from the date of shipment.
Similarly, suppliers’ credit & buyers’ credit including usance period of LC opened for import of platinum,
palladium, rhodium, & silver and rough, cut & polished diamonds, precious & semi-precious stones
should not exceed 90 days from the date of shipment. However, for ‘Clean Credit’, i.e a credit given by
foreign suppliers to its Indian customer/buyer without any LC (Suppliers credit)/LOU (Buyers
credit)/fixed deposits from any Indian Financial Institution for import of rough, cut & polished
diamonds, precious & semi-precious stones, may be permitted for a period not exceeding 180 days
from the date of shipment. Further, AD banks can allow extension of time in respect of such clean credit
for import of rough, cut and polished diamonds, for a period exceeding 180 days from the date of
shipment to a maximum period of 180 days beyond the prescribed period/due date beyond which they
may refer the cases to the respective RO of RBI. Such extension by AD banks may be subject to the
conditions such as, (a) AD banks being satisfied of the genuineness of the reason and bonafides of the
transaction and also that no interest payment is involved for the additional period; (b) reasons for such
extension are due to financial difficulties and or quality disputes and (c) importer is not under
investigation and is not a frequent offender. A half-yearly report of such extensions allowed by AD
banks customer-wise shall be submitted to the respective RO of RBI.
Needless to mention, banks have to exercise due diligence and follow KYC/AML guidelines prescribed by
RBI while undertaking import transactions of precious metals.
9. Merchanting Trade:
For a trade to be classified as Merchanting Trade, following conditions are to be satisfied.
a) Goods acquired should not enter domestic tariff area (DTA) &
b) The state of goods should not undergo any transformation.
AD banks shall take necessary precautions [including KYC/AML guidelines] while handling bonafide
merchanting trade transactions by ensuring that –
i)Goods involved in the transactions are permitted for exports/imports under the prevalent FTP of
India, as on the date of shipment and all the rules, regulations and directions applicable to exports
(except Export Declaration Form) and imports (except Bill of Entry) are complied with for the export leg
and import leg, respectively.
ii) The entire merchant trade transaction is completed within a period of 9 months and there should not
be any outlay of foreign exchange beyond four months.
iii) The commencement of merchanting trade would be the date of shipment/export leg receipt or
import leg payment, whichever falls first. The completion date of merchanting trade would be the date
of shipment/export leg receipt or import leg payment, whichever is the last.
iv) In case advance against export leg is received, the same shall be earmarked [can be kept as FD] to
make payment for the respective import leg.
v) Merchanting traders can be allowed to make advance payment for the import leg if demand is made
by the overseas seller. Based on commercial judgement, suitable decisions on this aspect may be taken
by the banks. However, if any such advance remittance for the import part exceeds USD 2 L per
transaction, the same shall be allowed only against BG/LC from an international bank of repute, except
where advance payment for the export leg has been received.
vi) Both the legs of merchanting trade transactions are routed through the same AD bank. All
documents, such as invoice, packing list, transport document, insurance etc. shall be verified to
ascertain the genuineness of the trade. If originals are not available, non-negotiable copies duly
authenticated by the bank handling documents may be taken.
Short term credit either by way of suppliers’ credit or buyers’ credit will be available for merchanting
trade transactions, to the extent not backed by advance remittance for the export leg including
discounting of export leg LC, as in the case of import transactions.
vii) LC to the supplier can be opened against confirmed export order keeping in view of the outlay and
completion of the transaction within 9 months. Payment for import leg can also be made out of the
balances in the EEFC account of the Merchant Trader.
viii) AD bank should ensure one-to-one matching in case of each Merchanting Trade transaction and
report defaults in any leg by the traders to the concerned RO of RBI on half-yearly basis (June and
December) in the prescribed format, within 15 days from the close of the half year.
viii) Names of defaulting merchanting traders, whose outstanding reaches 5% of their annual export
earnings would be placed in the caution list.
It is to be noted that Merchanting Traders have to be genuine traders of goods and not mere financial
intermediaries. Confirmed orders have to be received by them from the overseas buyers. AD banks
should satisfy themselves about the capabilities of Merchanting Trader to perform the obligations
under the order. The overall Merchanting Trade should result in reasonable profit to the Merchanting
Trader.
10. Merchanting Trade to Nepal & Bhutan:
As Nepal and Bhutan are land-locked countries, there is a facility of transit trade whereby goods are
imported from third countries by Nepal and Bhutan through India under the cover of Customs Transit
Declarations in terms of Govt. of India Treaty of Transit with these two countries. In consultation with
Govt. of India, it is clarified herein that goods consigned to the importers of Nepal and Bhutan from
third countries under Merchanting trade from India would qualify as traffic-in-transit, if the goods are
otherwise compliant with the provisions of India-Nepal Treaty of Transit and India-Bhutan Treaty of
Transit respectively.
11.Processing of import related payments through Online Payment Gateway Service Providers
(OPGSPs):
AD banks have been permitted facility of payment for imports of goods & software of value not
exceeding USD 2000 by entering into standing arrangements with the OPGSPs, subject to the following
conditions:
(a)The balances held in the import collection account shall be remitted to the respective 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. (b) The AD bank will obtain a copy of invoice and airway bill
from the OPGSP containing the name and address of the beneficiary as evidence of import and report
the transaction in R-Return under the foreign currency payment head. (c) Permitted credits in the
OPGSP import collection account will be the collection from the importers for online purchases from
overseas exporters electronically through credit card, debit card and net banking and charge back from
the overseas exporters. (d) Permitted debits in the OPGSP import collection account will be payment to
overseas exporters in permitted foreign currency, payments to Indian importers for returns and
refunds, payment of commission at rates/frequencies as defined under the contract to the current
account of the OPGSP and bank charges.
12.Settlement of import transactions in currencies not having a direct exchange rate:
To further liberalize the procedure and facilitate settlement of import transactions where the invoicing
is in a freely convertible currency and the settlement takes place in a currency of the beneficiary, which
though convertible, does not have a direct exchange rate, it has been decided by RBI to permit AD
banks to settle such import transactions (excluding those put through ACU mechanism), subject to the
conditions that- (a) Importer shall be a customer of the AD bank; (b) signed contract/invoice is in a
freely convertible currency; (c) the beneficiary is willing to receive the payment in the currency of
beneficiary instead of the original (freely convertible) currency of the invoice/contract/LC, as full and
final settlement; (d) AD bank is satisfied with bonafides of the transactions and (e) the counter party to
the importer of the AD bank is not from a country or jurisdiction in the updated FATF Public Statement
on High Risk & Non Co-operative jurisdictions on which FATF has called for counter measures.
Please refer to RBI Master Direction No. 17/2015-16 dated 01st January 2016 on ‘Import of Goods
and Services’ and subsequent AP (DIR) Series Circulars issued by RBI for further details.

Part III – Import Finance:

Import credit refers to the financial arrangements rendered to an importer in meeting the obligations
of import of goods & services. Banks used to extend credit facilities to importers – both fund based and
non-fund based- to enable them to import non-capital/capital goods or services /technologies. Import
finance is a major source for generating other income, compared to export finance. Hence branches
have to take earnest efforts to extend finance to import community in order to generate higher
revenue. Mode of finance normally extended to the import segment are-
a)Import Letter of Credit (IMLC): This is the most used method to finance imports. Banks used to open
import LC on DP or DA basis on behalf of importers to enable them to import goods/services. Though
this is non-fund based facility, all the norms prescribed for extending finance are to be followed by
properly assessing the financial statements of the importer.
Apart from that a credit report from the overseas banks / reputed rating agencies on the suppliers are
to be obtained to ascertain the track record and standings of the supplier.
Import LCs is normally opened for a maximum period of 180 days from the date of shipment. All the
provisions of UCPDC shall be complied with while extending this facility to our customers. Any credit
extended beyond this period and less than three years will fall under ‘Trade Credit’ scheme and all the
rules and regulations applicable to trade credit are to be followed by the AD bank.
b) Trade Credit: Extending trade credit facility is another method to finance imports. Depending on the
source of finance, trade credit is classified as ‘Supplier’s credit’ and ‘Buyer’s credit’, details of which
are already furnished above.
c) Import Loan: This is a method to finance imports by extending cash credit (CC) facility on
hypothecating or pledging the goods imported by our customer. Customers can avail of this facility if
they do not desire to avail of trade credit facility.
d) Foreign currency denominated loans (in India) can be extended to importers for the following
purposes:
i) To meet working capital requirements in INR.
ii) By way of pre-shipment/Post-shipment advances to the exporters.
iii) Import of raw materials.
iv) Import of Capital Goods.
v) Purchase of indigenous machinery.
vi) Repayment of existing Rupee term loan.
vii) Repayment of existing ECB, subject to prior approval of RBI/Govt., if required.
e) Bank guarantee: On behalf of an importer, bank is allowed to issue guarantees for the purposes
defined under FEMA, subject to availability of credit limits. A few examples are given below.
i) Bill of Lading guarantee: Certain imported goods get spoiled quickly or have high cost while storing
with customs. If the original BL is not available or import documents are yet to be received by the
importer, then by issuing a guarantee he can release the goods to take possession.
ii) Guarantee for Replacement Import: In case replacement of goods for defective import are being sent
by the overseas supplier before the defective goods imported earlier are reshipped out of India, then
AD banks can issue guarantees at the request of importer client for return of the defective goods,
according to their commercial judgement.
iii) Guarantees favouring Customs: In some imports, the importer (buyer) needs to execute a bank
guarantee along with a bond for availing of customs duty exemption. Such guarantees are usually used
where the buyer re-exports the goods after value addition. Further, such type of guarantees can also be
issued for importing machineries / capital goods for manufacturing exportable goods.

Needless to mention, all the precautions and safe guards are to be taken while extending finance to
importers, apart from compliance of KYC norms and AML standards as stipulated by RBI.

*****************

[ Compiled by Sri. A. Madhavan – Ref: RBI Circulars, FTP, FEMA etc. ]