RBI Proposes Simplified Regulations for Exporters and Importers

The Reserve Bank of India's (RBI) proposal to rationalise export and import regulations aims to simplify processes for traders, according to exporters. The draft operational guidelines for the export and import of goods and services, issued on July 2, will replace 61 notifications related to exports and 62 on imports. This move is seen as a significant step towards streamlining trade procedures.

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The Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai praised the RBI's efforts. He noted that the new guidelines would help simplify and streamline export-import processes. The central bank has released the Regulation of Foreign Trade under the Foreign Exchange Management Act (FEMA), 1999, along with Draft Regulations and Directions.

Exporters' Feedback on Draft Regulations

Exporters are required to submit a declaration specifying the full export value of goods or services to a designated authority, as per the draft. The RBI has invited comments on these draft regulations and directions to authorised dealer banks by September 1. Sahai highlighted that the proposal to inform exporters before placing them on the Caution List would address issues that previously led to caution listing.

The time frame between import and export transactions is proposed to be extended from 120 days to 180 days, as requested by FIEO. However, FIEO suggested that the draft notification should align with the new Foreign Trade Policy to allow all goods under merchanting trade. Merchanting trade involves an Indian company buying goods from a foreign supplier and selling them to a foreign buyer without the goods entering or leaving India.

Merchanting Trade Adjustments

Currently, merchanting exporters have 125 days to make payments for goods bought overseas and receive payments for those sold in third countries. The proposal aims to extend this period to 180 days. Before 2020, the RBI automatically caution-listed exporters if payments were delayed beyond 24 months. This task was later assigned to Authorised Dealers due to delays in updating payment receipts by banks.

Economic think tank Global Trade Research Initiative (GTRI) suggested two crucial changes for promoting e-commerce from India. GTRI Founder Ajay Srivastava stated that the RBI should waive bank charges for small-value e-commerce exporters and accept reduced forex realisation due to discount sales. These changes are essential for e-commerce exporters shipping packages with average values of Rs 3,000.

Challenges Faced by E-commerce Exporters

Srivastava explained that the current RBI mandate requires exporters to submit shipping and payment details to their banks, which then update the RBI's Export Data Processing and Monitoring System (EDPMS) portal. This process is cumbersome and costly, with banks charging Rs 1,000-2,000 per shipping bill for reconciliation. For small-value packages, these charges significantly reduce profits and often make the business unviable.

Exporters frequently sell goods at a discount, resulting in lower payments. Srivastava urged that the RBI should accommodate these reduced payments and allow EDPMS closure accordingly. By implementing these changes, the RBI can alleviate financial burdens on small-value e-commerce exporters and create a more favourable environment for their growth.

The proposed changes by RBI aim to streamline trade processes and address concerns raised by exporters. By extending transaction periods and adjusting regulations for e-commerce, the central bank seeks to foster a more efficient trading environment.