General and Operational Guidelines relating to Import Payments

Ashish M. Shaji

10 Sep, 2022

As per section (p) of FEMA, the term import means bringing any goods or services into India. Import trade is regulated and managed by the Directorate General of Foreign Trade under the Ministry of Commerce and Industry, Government of India. Authorized Dealer Category-I (AD Category-I) banks must ensure that the imports into India are in accordance with the Foreign Trade Policy and Foreign Exchange Management (Current Account Transactions) Rules, 2000 formulated by the Government of India and the directions issued by the Reserve Bank under Foreign Exchange Management Act, 1999 (FEMA) from time to time.

Remittances for Import payments

AD Category –I banks may allow remittances for making payment for imports into India once all the requisite details are made available by the importer, and as per applicable laws in force, remittance is for bonafide trade transactions.

Obligation of Purchaser of Foreign Exchange

Notwithstanding anything covered in the Manner of Payment in foreign exchange, a person resident in India can make import payments in foreign exchange via an international card held by the person, in rupees from international credit or debit card through the credit or debit card servicing bank in India against the charge slip or as specified by the Reserve Bank from time to time, provided that the transaction is in compliance with the extant provisions and the import is in compliance with the Foreign Trade Policy in force.

Any person resident in India can also make payment-

• In rupees for meeting expenses for boarding, lodging, and services related to it or travel to and from and within India of a person who is resident outside India but is on a visit to India;
• Through a crossed cheque or a draft as consideration for gold or silver purchase in any form imported by such person as per the terms and conditions imposed under any order issued by the Central Government under the Foreign Trade (Development and Regulations) Act, 1992 or any other law in force;
• A company or resident in India may make payment in Rs. to its non-whole time director who is on a visit to India and is resident outside India and is entitled to payment of sitting fees, commission, or remuneration and travel expenses in accordance with the provisions in the company’s Memorandum of Association (MOA) or Articles of Association or in any agreement entered into it or in any resolution in the general meeting passed by the company or by its Board Directors, provided the requirement applicable for making such payments are complied with.

Time Limit for Settlement of Import Payments

• Time limit for Normal imports
  1. Remittances against imports must be completed in six months period from the date of shipment except in cases where amounts are held towards the guarantee of performance etc.
  2. AD Category –I banks may permit settlement of dues related to import delayed due to disputes etc. If any interest, on such delayed payments, usance bills or overdue interest is payable only for a period up to three years from the date of shipment.

• Time limit for Deferred Payment Arrangements

Deferred Payment Arrangements up to five years are treated as trade credits for which the guidelines as laid down in the RBIs master circular may be followed.

Detailed operational procedure for Import Data Processing and Monitoring System (IDPMS)

Write off of Import payments

• AD Category –I banks may consider the closure of bills in IDPMS that involve write off up to the limit of 5% of the invoice value in cases where the amount declared in Bills of entry varies from the actual remittance marginally because of fluctuation in exchange rates, discounts, change in the amount of freight, insurance, etc. In cases where write off is on account of quality issues, short shipment or destruction of goods by the customs/ port/ health authorities, may be closed with remarks subject to documentation submission for the same, irrespective of the amount involved.
• While allowing write off, AD Category –I banks should ensure that-
  • The case is not the subject matter of any pending criminal or civil suit;
  • The importer has not come to the adverse notice of the Enforcement Directorate or the CBI or any other such law enforcement agencies;
  • And there is a system in place under which internal inspectors or the auditors of the AD Category –I banks including external auditors appointed by authorized dealers should carry out random sample check/percentage check of write off of import bills;
• Cases that are not covered by the above instructions/ beyond the above limits may be referred to the concerned regional office of the RBI.
• The guidelines mentioned above are only meant to facilitate closure of bills in IDPMS and doesn’t in any way absolve the importer from remitting or receiving the amount in case the circumstance change.

Extension of time

1. The AD Category –I banks may consider granting an extension of time for settlement of import payments up to a period of six months at a time irrespective of the invoice value for delays on account of disputes regarding quantity, quality or non-fulfillment of the terms of the contract, financial difficulties and cases wherein importer filed suit against the seller. In cases where sector-specific guidelines have been issued by the RBI for the extension of time (rough, cut and polished diamonds), the same will be applicable.
2.  While granting time extension AD Category –I banks must ensure-
   • That the import payments covered by the invoices are not under investigation by the Directorate of Enforcement or CBI or any other investigation agencies;
   • When considering time extension beyond one year from the date of remittance, the total outstanding of the importer should not exceed one million US dollars or 10% of the average import remittances during the preceding two financial years whichever is lower;
   • The date up to which the extension has been granted may be indicated in the remarks column where time extension has been granted by the AD Category –I banks.
3. Cases that are not covered by the above instructions/ beyond the above limits may be referred to the concerned regional office of the RBI.

Processing Import payments through Online Payment Gateway Service Providers

AD Category –I banks have been allowed to offer the facility of import payments of goods and software of value not exceeding 2000 US dollars by entering into standing agreements with the Online Payment Gateway Service Providers subject to the following:

• The balances held in the import collection account will be remitted to the respective overseas exporter’s account on receipt of funds from the importer and in no case later than two days from the credit to the collection account.
• The AD Category –I bank shall obtain a copy of invoice and airway bill from the OPGSP having the name and address of the beneficiary as an evidence of import and report such transaction.
• The permitted credits in the OPGSP Import Collection account would be collection from Indian importers for online purchases from foreign exporters through credit, debit card and net banking and chargeback from the overseas exporters.
• The permitted debits in the OPGSP Import Collection account would be payment to overseas exporters in permitted foreign currency, payment to Indian importers for refunds and returns, payment of commission at rates/frequencies as specified under the contract to the OPGSP’s current account and bank charges.

Conclusion

In order to liberalize the procedure and to facilitate the settlement of import payments where the invoicing is in a free convertible currency, and the settlement takes place in the beneficiaries currency which doesn’t have a direct exchange rate, has been decided that AD Category –I banks might allow settlement of such import transactions subject to the conditions like the importer shall be a customer of the AD bank, where the signed contract is in a freely convertible currency, etc.