CHAPTER 7
IMPORT OF GOODS, CURRENCY ETC., MERCHANTING
TRADE AND OTHER RELATED MATTERS
PART A - IMPORT OF GOODS
7A.1 General
7A.2 Import Licences
7A.3 Obligations of Purchaser of Foreign Exchange for Import
7A.4 Manner of Rupee Payment
7A.5 Letters of Authority
7A.6 Attestation of Invoices by Authorised Dealers
7A.7 Form A1
7A.8 Imports Financed in Rupees
7A.9 Import Licences for c.i.f. value
7A.9A Imports by Government/Public Sector Undertakings, etc.
7A.10 Advance Remittance
7A.11 Time Limit for Settlement of Import Payments
7A.12 Interest on Import Bills
7A.13 Appointment of Buying Agents Abroad
7A.14 War Risk Insurance/Bunker/Congestion Surcharge/Premium
for Extended Insurance cover
7A.15 Endorsement on Import Licences
7A.16 Imports under Penalty
7A.17 Imports into Bonds
7A.18 Remittances against Replacement Imports
7A.19 Surrender of Import Licences to Exchange Control
7A.20 Evidence of Import
7A.21 Precautions for Handling Import Documents
7A.22 Postal Imports
7A.23 Imports through courier
7A.24 Supply of Books in DTA by EOUs/EPZs
7A.25 Legal Expenses connected with imports
7A.26 Import of Software through Datacom.Channels/Internet
7A.27 Import of Second-hand Capital Goods
7A.28 Import of Gold/Platinum/Silver by Nomonated
Banks/Agencies
7A.29 Import of films on lease/rental basis
PART B - IMPORTS UNDER FOREIGN LOANS/CREDITS
7B.1 General
7B.2 Procedure for Obtaining Reserve Bank Approval
7B.3 Registration Number
7B.4 Opening of Bank Accounts in India/Abroad
7B.5 Issue of Bank Guarantee
7B.6 Submission of Utilisation Statements
7B.7 Repayment of Loan/Credit and Payment of Other Charges
Loans by Export-oriented Units on Self-liquidation Basis
7B.8A Foreign Currency Loans under U.S.$ 3 Mn. Scheme
7B.9 Sub-loans out of Lines of Credits/Loans obtained by Term
Lending Institutions
7B.10 Loans for Purchase of Aircraft/Ships
7B.11 Import Under Foreign Loans/Credits arranged by
Government of India from foreign Governments/Institutions
PART C - MERCHANTING TRADE
7C.1 General
7C.2 Advance Remittances to Overseas Suppliers
PART D - IMPORT OF GOLD, SILVER SECURITIES, CURRENCY, ETC.
7D.1 Import of Gold, Silver and Jewellery
7D.2 Import of Cheques, etc.
7D.3 Import of Securities
7D.4 Import of Indian Currency
7D.5 Import of Foreign Exchange
ANNEXURE
Guidelines for Handling Import Bills- Operating Procedure
IMPORT OF GOODS, CURRENCY ETC., MERCHANTING TRADE AND OTHER
RELATED MATTERS
PART A - IMPORT OF GOODS
General
7A.1
- Import trade is regulated by the office of the Director General of
Foreign Trade (DGFT) and its regional offices functioning under the Ministry
of Commerce, Government of India. Policies and procedures for import are
announced by the DGFT. Sale of foreign exchange or rupee transfer to
non-resident account towards payment for import of goods into India from any
foreign country, except Nepal and Bhutan, permitted under the prevailing
import trade control policy may be made by authorised dealers without
approval of Reserve Bank subject to the conditions set out in subsequent
paragraphs.
NOTE:
For Exchange Control purposes, accounts in India of Indians, Nepalese and
Bhutanese resident in Nepal and Bhutan as well as Indian, Nepalese and
Bhutanese firms, companies or other organisations including banks
functioning in these countries are regarded as resident accounts and rupee
transfers to such accounts against imports into India from these countries
(or for any other purpose) may be made freely without reference to Reserve
Bank. Sale of foreign currencies in payment for imports from the above
countries is not permitted. Payments from India to suppliers in third
countries against imports into Nepal/Bhutan are also not permitted.
- Authorised dealers are permitted to open letters of credit on behalf of
their
customers who are known to be participating in the trade. While doing so,
they should follow normal banking procedures, UCPDC provisions, etc. The
letter of credit should, in particular, stipulate a condition requiring that
the bill of lading should indicate the name and address of the importer in
India as well as the authorised dealer opening the credit. Remittances for
imports under letters of credit or otherwise should be made against shipping
documents/lorry/railway receipts/Exchange Control copies of bills of
entry/postal/courier wrappers, etc. except where it is otherwise provided in
this Chapter.
- In terms of item No.54 of the list of consumer goods given under paragraph
156
in Part II(A) of Chapter XV of Export and Import Policy (1992-97), import of
designs and drawings is permitted without any restrictions. Remittances
towards import of designs and drawings may be allowed by authorised dealers
on production of (i) suppliers' invoice; and (ii) postal wrappers/exchange
control copy of Bill of Entry as documentary evidence in support of import,
subject to the following conditions :-
- Import of designs and drawings has been made strictly as per the Exim Policy
in force.
- The transaction is as per provisions of paragraphs 7A.1(iii), 7A.10, 7A.11,
7A.20, 7A.21, 7A.22 7A.23 & 7A.26 of ECM.
- The entire payment relates to the cost of import of designs and drawings
only and does not include any other cost.
- Production of undertaking/certificate regarding payment of Income-tax (cf.
Paragraph 3B.10).
- The value of designs and drawings imported has been declared to the Customs
authorities and incorporated in the Exchange Control copy of Bill of Entry.
- In terms of Research and Development Cess Act, 1986 a Research and
Development Cess has to be paid by Industrial concerns importing technology,
drawings and designs, on all payments made by such concerns which will also
include payments made locally in Rupees towards fare, living expenses etc.
of foreign technicians/personnel who have been deputed to India in
connection with the import of technology, drawings and designs. Authorised
dealers should, therefore, while allowing such remittances, obtain
confirmation/ evidence from the Indian companies that Research and
Development Cess has been paid. In terms of Technology Department Board Act,
l995 and amendment made to the R & D Cess Act, in 1995 by Government of
India, the power of the Industrial Development Bank of India (IDBI) to call
for information and impose penalty has been transferred to the newly
constituted Technology Development Board. Accordingly, where such a
confirmation/evidence is not produced by Indian companies, authorised
dealers should immediately, but not later than 30 days from the date of
remittance, report the matter to the Secretary, Technology Development
Board, Technology Bhavan, Department of Science and Technology, Mehrauli
Road, New Delhi 110 016 alongwith the following particulars.
- Name and address of applicant industrial concern
- Name and address of the beneficiary
- Purpose of remittance(with brief details)
- Amount and currency of remittance
- Date of remittance.
Authorised dealers may also open letters of credit covering imports of
designs and drawings subject to the above referred conditions and also
subject to the applicant's undertaking to produce documentary evidence of
import within 3 months from the date of remittance.
Import Licences
7A.2
Authorised dealers should not open letters of credit or allow remittances
for the import of goods
included in the negative lists unless the importer submits a licence marked
For Exchange
Control Purposes'. Special conditions, if any, attached to the licence
should be adhered to while opening letters of credit or making remittances.
Obligations of Purchaser of Foreign Exchange for Import
7A.3
Section 8(3) of FERA 1973 makes it obligatory for any person who acquires
foreign exchange for any particular purpose but does not for any reason
whatsoever
use it for that purpose, to surrender the foreign exchange without delay to
an authorised dealer in foreign exchange. Use of such foreign exchange for
any other purpose is an offence under the Act. Furthermore, in terms of
Section 8(4) ibid, where any person acquires foreign exchange for importing
goods into India but does not at all import the goods or does not import
goods of a value representing the foreign exchange acquired within a
reasonable time or imports goods of a kind, quality or quantity different
from that specified by him at the time of acquisition of the foreign
exchange, he shall be presumed to have been unable to use the foreign
exchange for the purpose for which it was acquired or, as the case may be,
to have used the foreign exchange for a purpose other than the one for which
it was acquired. Pursuant to the provisions of Section 9 of FERA 1973,
Reserve Bank has permitted credit of rupees to non-resident accounts as one
of the methods of payment to persons resident outside India for making
payment towards imports. This permission is subject to the condition that
payment in such manner by any person is made towards imports as declared by
the importer and not for any other purpose. It is, therefore, obligatory for
any such person to use the payment only for the purpose declared by him. If
the payment is used for any other purpose, it will amount to a breach of the
condition subject to which permission has been granted. These provisions are
also applicable in case of payments through Asian Clearing Union.
Manner of Rupee Payment
7A.4
Payments in retirement of bills drawn under letters of credit as well as
bills received from
abroad for collection against imports into India, must be received by
authorised dealers,
irrespective of amount, by debit to the account of the importer with
themselves or by means of a crossed cheque drawn by him on his other
bankers. Payments against bills should not be accepted in cash. This rule
also applies to private imports where the amount involved is Rs.20,000/- or
more.
Letters of Authority
7A.5
Authorised dealers may open letters of credit or make remittances where the
Exchange Control copy of relative import licence has been issued in the name
of a
party other than the applicant, provided the applicant produces a letter of
authority obtained from the import licence holder in his favour authorising
him, inter alia, to open letters of credit or make remittances in payment
towards import under the licence (subject to the terms and conditions, if
any, stipulated in this regard in the Import Policy in force). Authorised
dealers may also open letters of credit or make remittances towards imports
permitted without licences on behalf of agents appointed by eligible
importers, after satisfying themselves by reference to the Import Policy in
force that the latter are permitted to utilise services of agents for the
purpose of opening letters of credit etc. for the imports in question. In
all such cases, the responsibility for production of the Customs Bills of
Entry, where required, will rest on the letter of authority holder or agent
and an undertaking to do this must be taken from him.
Attestation of Invoices by Authorised Dealers
7A.6
Under Customs regulations, importers have to submit to Customs at the time
of
clearance of goods a copy of the invoice attested by the authorised dealer
through
whom remittance has been or will be made, as corroboratory evidence of the
value of the goods declared on Customs Bills of Entry. To enable the
importer to comply with this requirement, authorised dealers should furnish
to him a duly attested copy of the invoice in all cases where relative bills
of exchange and/or shipping documents were received through their medium.
Where documents were received by the importer direct, authorised dealers may
also attest copy of the invoice on request by the importer, provided the
remittance has been or will be made through them.
Form A1
7A.7
Applications by persons, firms and companies for making payments towards
imports
into India must be made on form A1. Variants of this form have been devised
in
different colours to be used for -
- remittance in foreign currency,
- transfer of rupees to non-resident bank accounts, and
- remittance through Asian Clearing Union.
Care should be taken to see that appropriate form A1 is used. Care should
also be taken to fill in correctly the various details relating to the
import as required on the form and to furnish necessary
declarations/undertakings thereon.
Imports Financed in Rupees
7A.8
Regulations contained in this Chapter are also applicable to imports which
are financed in
rupees and payment for which is made by crediting rupees to a non-resident
account in India.
There is also no objection to proceeds of rupee bills being converted into
any convertible foreign currency, if remitting bank so desires.
Import Licences for c.i.f. Value
7A.9
- Import licences wherever issued are for the c.i.f. value of the goods to be
imported which
includes commission, if any, allowed by the supplier/manufacturer. Import
licences cannot be
used to the full amount in cover of f.o.b. cost of the goods leaving
insurance, freight and commission to local agent of the supplier, as
additional charges to be paid in rupees over the amount specified in the
import licence. (See paragraph 7A.13 also).
- Importers sometime enter into contracts on f.o.b. terms and agree to the
suppliers paying
for the freight to be reimbursed to them along with the cost of the goods.
Authorised dealers in such cases should, before making the remittance of
freight charges, ascertain the actual freight amount paid with reference to
the original freight bill or memo issued by the shipping company or the
amount stated on the relative bill of lading.
Imports by Government/Public Sector Undertakings, etc.
7A.9A
As per the procedure laid down by Government of India, import contracts by
Central/State
Governments, Central & State Public Sector undertakings and autonomous
bodies are required
to be made on FOB/FAS basis in respect of transportation of Government owned
/ controlled cargo by foreign flag vessels (i.e. ocean transportation of
cargo) . In case of the import contracts entered into on terms other than
FOB/FAS, a No Objection Certificate from the Ministry of Surface Transport
(MOST), Government of India is required to be obtained. Authorised dealers,
before opening import letters of credit or releasing foreign exchange for
imports, should ensure that necessary No Objection Certificate is obtained
by the concerned Government organisation in cases of import contracts made
on terms other than FOB/FAS.
Advance Remittance
7A.10
Authorised dealers may allow advance remittances for import of goods without
any ceiling subject to the following conditions :
- Documentary evidence indicating the cost of the goods and the insistence of
the overseas seller on advance payment should be submitted by the importer.
- The importer should hold the EC copy of a valid import licence if the goods
to be imported are those included in the negative list of imports given in
the Export and Import Policy.
- Remittance is made direct to the suppliers.
- If the amount of advance remittance exceeds U.S.$ 25,000 or its equivalent,
a guarantee from an international bank of repute situated outside India or a
guarantee of an authorised dealer in India, if such a guarantee is issued
against the counter-guarantee of an international bank of repute situated
outside India, should be obtained. An unconditional standby L/C from an
international bank of repute situated outside India may be accepted in lieu
of bank guarantee provided it is irrevocable, non-transferable and lists out
full particulars of the transactions and there is a clear provision for
prompt payment being received in convertible currency in an approved manner.
The validity of the guarantee/letter of credit should cover adequately the
period for the purpose of enforcing payment.
- Physical import of goods into India should be made within three months
(twelve months in case of capital goods) from the date of remittance and the
importer should give an undertaking to furnish documentary evidence of
import within fifteen days from the close of the relevant period. Authorised
dealers may allow extension of time for import not exceeding one month
(three months in the case of capital goods) provided the reasons for seeking
extension of time are found convincing. In cases where the advance
remittance has been made against a bank guarantee, the guarantee should be
suitably amended, if need be, to cover the extended period for import of
goods into India.
- In case of import of capital goods, certified copy of importer's contract
with the supplier or any other evidence indicating terms of payment should
be submitted.
- In the case of import of books, a list of books to be imported should be
obtained. This should be attached to the form A1 while submitting it along
with the relevant R return.
- Authorised dealer should ensure that in the event of non-import of goods,
the amount of advance remittance is repatriated to India.
Time Limit for Settlement of Import Payments
7A.11
- The basic rule relating to remittances against imports is that they should
be completed not later than six months from the date of shipment.
Accordingly,
deferred payment arrangements involving payments beyond a period of six
months from the date of shipment are not permissible without approval of
Reserve Bank/Government of India (See Part B of this Chapter). There would,
however, be no objection to importers withholding a small part of the cost
of the goods not exceeding 15 per cent towards guaran3tee of performance
etc. Authorised dealers may make remittances of amounts so withheld,
provided the earlier remittance had been made through them. No interest
payment should be allowed to be remitted on these withheld amounts.
- Sometimes, settlement of import dues may be delayed due to disputes,
financial difficulties, etc. Authorised dealers may make remittances in such
cases even if the period of six months has expired, provided -
- authorised dealer is satisfied about the bona fides of the circumstances
leading to the delay in payment;
- No payment of interest is involved for the additional period. However, in
cases where the overseas supplier insists on payment of interest, it may be
allowed in accordance with the provisions contained in paragraph 7A.12 upto
a maximum period of 60 days beyond 180 days from the date of shipment
provided the import bill is paid within that period.
NOTES:
A.
The above concession permitting remittances beyond six months from the date
of shipment should not be construed as general permission for importers
concluding extended payment terms with overseas suppliers of goods providing
payment beyond six months from date of shipment. All cases of extended
payment terms require prior approval of Reserve Bank.
B.
In case of import bills negotiated under letter of credit and retired by
importer after expiry of six months from the date of shipment of relative
goods, settlement of the payment would be deemed to be completed within six
months from shipment if reimbursement was given to overseas bank within that
period,
C.
Remittances against import of books may be allowed without restriction as to
time limit, provided no interest payment is involved nor has the importer
forgone any part of the discount/ rebate normally allowed to importers
towards compensation for delay in settlement of dues.
Interest on Import Bills
7A.12
Authorised dealers may make remittances on account of interest accrued on
usance bills under
'normal interest clause' or of overdue interest paid on sight bills for a
period not exceeding six
months from the date of shipment in respect of imports without prior
approval of Reserve Bank. In case of pre-payment of usance import bills,
remittances may be made only after reducing the proportionate interest for
the unexpired portion of usance at the rate at which the interest has been
claimed or the 'prime' rate (or its equivalent) of the country in the
currency of which the goods are invoiced, whichever is higher. Where
interest is not separately claimed, remittances may be allowed after
deducting the proportionate interest for the unexpired portion of usance at
the prevailing 'prime' rate.
NOTE :
Interest under 'normal interest clause' would mean interest at the 'prime'
rate (or its equivalent) of the country in the currency of which the goods
are invoiced.
Appointment of Buying Agents Abroad
7A.13
Authorised dealers may, on application and supported by particulars
including
relevant correspondence/buying agency agreement, allow remittance of
commission to overseas buying agents of Indian importers provided the rate
of commission does not exceed 2.5 per cent of f.o.b. value of imports. The
amount remitted should be endorsed on Import Licence [See paragraph 7A.9(i)
also].
War Risk Insurance/Bunker/Congestion Surcharge/ Premium for Extended
Insurance
7A.14
Authorised dealers may make remittances towards war risk insurance premium,
bunker/congestion surcharges at foreign ports, premia for extended insurance
cover
etc. which are incidental to imports provided the amounts are reasonable and
adequate and satisfactory documentary evidence therefor have been submitted.
Endorsement on Import Licences
7A.15
- Authorised dealers should note to endorse on import licences, under their
stamp
and signature, the details of letters of credit opened or forward contracts
booked or
remittances made in foreign currency as also the amount of insurance,
freight and commission paid by the importer locally in rupees [See paragraph
7A.9].
- Authorised dealers may likewise endorse the value of the back-to-back inland
letters of credit opened by them on behalf of duty free licence holders
(including transferees) as required in terms of the relevant provisions of
the Export Import Policy.
Imports under Penalty
7A.16
Authorised dealers may make remittances against goods imported without
authority,
but later allowed to be cleared by the Customs Authorities against payment
of penalty,
to the extent of c.i.f. value of the goods indicated on the relative
Exchange Control copy of Customs Bill of Entry evidencing imports of goods
to India.
Imports into Bond
7A.17
- Goods are frequently imported into bond by merchants for purpose of
re-export.
No import licence is required for such imports. Sales of foreign exchange
against such
imports are not permitted.
- Reserve Bank grants special facility to firms and companies in India to
import goods into
bond without import licences, for supply to foreign going vessels and sale
to diplomatic missions/personnel etc. subject to certain conditions. The
procedure to be followed in regard to opening of letters of credit/making
remittances towards cost of import of goods into bond in such cases is as
follows :-
- The importer who has been granted the facility should advise the concerned
office of Reserve Bank the name and address of the authorised dealer
(designated authorised dealer) through whom letters of credit will be
opened/remittances will be effected covering cost of import of goods into
bond, under advice to the concerned authorised dealer.
- The designated authorised dealer may thereafter open letters of credit/make
remittances on behalf of the importer concerned in accordance with the
regulations covering import of goods into India. The importer should
alongwith the application for opening remittance furnish a declaration to
the designated authorised dealer that he will submit the Exchange Control
copy of bill of entry for bond within three months from the date of
remittance. In case of non-submission of the bills of entry designated
authorised dealer should follow up with the matter with importer.
- While opening the letter of credit/making remittance for import of goods
into bond, the designated authorised dealer should ensure that
- the importer holds a valid permission from Reserve Bank for import of goods
into bond.
- the goods sought to be imported do not fall under the list of `Prohibited
Items' for import as per the Exim Policy.
- The designated authorised dealer should maintain a separate register to
record the details of letters of credit opened/remittances effected
(importer wise) in respect of such imports. The authorised dealer should
also furnish to the concerned importer a monthly statement under his stamp
and signature giving the following details of letters of credit
opened/remittances effected during the calendar month for import of goods
into bond for submission by the importer alongwith the monthly statements to
Reserve Bank.
- Date of opening of letter of credit/remittances
- Description of goods
- Name & address of the supplier
- Value of goods
Remittances against Replacement Imports
7A.18
Where goods are short-supplied, damaged, short-landed or lost in transit,
the procedure laid down below should be followed for payment against
replacement goods:
- In cases where no letter of credit has been opened or remittances made,
Exchange Control copy of the import licence may be automatically treated as
valid for the replacement consignment, provided it is shipped within the
validity period of the licence.
- If the Exchange Control copy has already been utilised to cover the opening
of a letter of credit against the original goods which have been lost, the
original endorsement to the extent of the value of the lost goods may be
cancelled by authorised dealers without reference to Reserve Bank, provided
the insurance claim relating to the lost goods has been settled in favour of
the importer by remittance from abroad through an authorised dealer if
insurance was covered abroad and by local payment in rupees if insurance was
covered in India. Payment for the replacement goods may then be made against
suitable endorsement on the import licence subject to the conditions that
the replacement consignment is shipped within the validity period of the
licence.
- If replacement goods are to be shipped after the expiry of import licence,
the importer should be asked to apply to ITC Authorities for replacement or
for revalidation of the expired licence.
Surrender of Import Licences to Exchange Control
7A.19
Exchange Control copy of import licence submitted by importer for opening
letters
of credit or making remittances should be retained by authorised dealer and
forwarded to Reserve Bank after it has been fully utilised along with R
Returns pertaining to the period during which the last remittances under the
licences were made.
Evidence of Import
7A.20
- It is obligatory on the part of importers to submit Exchange Control copy of
Bills of Entry for Home Consumption/Postal/Wrappers to the authorised
dealer hrough whom relative remittance was made as evidence that the goods
for which the payment was made have actually been imported into India.
Authorised dealer should ensure that in all cases, including cases of
advance remittances permitted vide paragraph 7A.10, these are submitted by
their importer customers and are verified. In respect of imports made on D/A
basis, since goods would normally be cleared before the due date of payment,
authorised dealers should insist on production of documentary evidence of
import i.e. Exchange Control copy of Bill of Entry for Home
Consumption/Postal/Wrappers at the time of effecting remittance of the
import bill. Authorised dealers should also advise this requirement to their
importer customers in writing while delivering the documents against
acceptance.
NOTES:
A.
In case of goods imported and stored by 100% Export Oriented Units/Units in
Export Processing Zones and Free Trade Zones in bonded warehouses, it will
be in order for authorised dealers to accept Exchange Control
(quadruplicate) copy of Into Bond Bill of Entry for Warehousing as evidence
of import.
B.
As regards submission of evidence in respect of imports by courier services,
please see paragraph 7A.23.
C.
In respect of imports on D/A basis 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. authorised dealers may, on
merits, allow reasonable time not exceeding three months from the date of
remittance to the importer to submit the evidence of import.
- Authorised dealers should in all cases acknowledge receipt of Exchange
Control copy of bill of entry/postal/wrappers from importers by issuing
acknowledgement slips containing the following particulars:
- Importer's full name and address with code number.
- Import licence number and date (wherever applicable)
- Bank's reference of letter of credit number etc., if any.
- Number and date of Exchange Control copy of bill of entry/postal wrapper and
the amount of import.
- Particulars of goods imported.
- Internal inspectors or auditors (including external auditors appointed by
authorised dealers) should carry out 100% verification of all the Exchange
Control copies of bills of entry/postal/wrappers and a certificate to that
effect should be forwarded, on half-yearly basis, to the office of Reserve
Bank under whose jurisdiction the authorised dealer is situated.
- In case an importer does not furnish the Exchange Control copy of Bill of
Entry within three months from the date of remittance (or within prescribed
period as provided in paragraph 7A.10), the authorised dealer should issue a
reminder to the importer asking him to roduce it forthwith. If there is
still no response, a reminder by registered post with acknowledgement due
should be issued not later than one month from the date of the first
reminder.
- Authorised dealers should forward to Reserve Bank a statement as at the end
of each calendar quarter in form BEF furnishing details of import
transactions in respect of which the importers have defaulted in submission
of Exchange Control copies of Bills of Entry within a period of 21 days from
the date of issue of registered (acknowledgement due) reminder. The
quarterly statement should be submitted to Reserve Bank within 15 days from
the end of the quarter to which the statement relates.
- Exchange Control copy of Bill of Entry for Home Consumption/postal wrappers
should be preserved by authorised dealers for a period of one year from the
date of its verification as required under paragraph (iii) above. However,
in respect of cases which are under investigation by investigating agencies,
the Exchange Control copy of Bill of Entry for Home Consumption/postal
wrappers should be preserved till the investigating agency concerned gives
clearance for destruction.
Precautions for Handling Import Documents
7A.21
Authorised dealers should exercise due care while handling import documents
on collection basis
on behalf of importer customers with reference to their line of business,
financial standing,
frequency of import, etc. to establish the genuineness of the import. In the
case of bills involving large values, authorised dealers should satisfy
themselves that the importer is known to be trading in items mentioned in
the shipping documents or that the items are required for his actual use. In
case of importers who are not their constituents, authorised dealers should,
at the time of acceptance of the documents/making payment, call for detailed
Certificate-cum-Report from their bankers in support of the genuineness of
imports. Authorised dealers should comply with the detailed procedural
precautions laid down in Annexure to this chapter while handling import
documents.
Postal Imports
7A.22
- Remittances against bills received for collection in respect of imports by
post parcel
may be made by authorised dealers, provided the goods imported are such as
are normally despatched by post parcel. In these cases, the relative parcel
receipts must be produced as evidence of despatch through the post and an
undertaking to submit post parcel wrappers within three months from the date
of remittance should be furnished by importers. If the parcel has already
been received in India, the parcel wrapper should be produced in support of
the remittance application. Where goods to be imported are not of a kind
normally imported by post parcel or where authorised dealer is not satisfied
about the bona fides of the application, the case should be referred to
Reserve Bank for prior approval with full particulars together with relative
parcel receipt/s (or wrapper/s).
Imports through Post
7A.22
- Authorised dealers may allow remittance towards import of books,
samples, etc. through post parcel, on production of original invoice by the
importer, without insisting on submission of parcel receipt/postal wrappers,
where the amount of the bill does not exceed U.S.$ 250, or its equivalent
provided the import is made in accordance with the current EXIM policy and a
declaration is furnished by the applicant that the goods have been imported
through post parcel.
NOTE:
Authorised dealers may make remittances towards import of books by post
parcel by book-sellers/publishers against bills received for collection,
irrespective of the amounts involved, without prior approval of Reserve Bank
against endorsement on the import licence where applicable in the normal
course. They may also make remittances even if import licences covering the
imports have been issued subsequent to the date of import subject to
endorsement on such licences.
Imports through Courier
7A.23
Under the current Exim Policy, import of goods through courier is permitted,
in
accordance with the Courier Imports (Clearance) Regulations, 1995, as
amended by
the Courier Imports (Clearance) Amendment Regulations, 1997, notified by the
Government of India, Department of Revenue, Central Board of Excise &
Customs (CBEC), New Delhi. Where the C.I.F. value of the consignment
imported through courier service, does not exceed Rupees one lakh, the
relative Bill of Entry is required to be filed by the registered courier
service. However, where the value of the consignment is Rupees one lakh or
more, importers are required to file separate Bill of Entry, as in the case
of other imports. Accordingly, in respect of remittances for imports through
courier services, authorised dealers should ensure submission of Exchange
Control Copy of Bill of Entry for home consumption in the case of imports
valued at Rupees one lakh or more. Where the value of import is less than
Rupees one lakh, authorised dealers may obtain from the importer, a copy of
Bill of Entry in the prescribed Form, issued by the Customs in the name of
the registered courier, duly certified by the courier company, indicating
thereon the particulars of the consignment for which the copy has been
issued.
Supply of Books in Domestic Tariff Area (DTA) by EOUs/EPZs
7A.24
EOUs and Units in EPZs undertaking printing of books in India on behalf of
overseas publishers are sometimes required to supply books to Indian
booksellers
as per instructions from the overseas publishers. The cost (less discount)
of such books is remittable to overseas publishers. Authorised dealers may
allow such remittances by Indian booksellers to overseas publishers on
application from the Indian bookseller subject to the production of the
following documents:
- A letter from the overseas publisher that the books will be supplied by
EOU/unit in EPZ which had undertaken the job of printing of books on its
behalf.
- Original invoice from the publisher indicating the description and price of
books and the discount allowed.
- A letter/certificate from the Development Commissioner conveying his
approval to the EOU/ unit in EPZ for the supply of books in DTA, indicating
therein the description of books and number of copies.
- Evidence regarding customs duty, if any, payable on release of books from
EOU/EPZ to DTA.
Legal Expenses Connected with Imports
7A.25
Authorised dealers may effect, on behalf of their importer constituents,
remittances towards
legal expenses relating to import transactions subject to submission of
suitable documentary
evidence and satisfying themselves about the chances of success of the case
by calling for legal opinion and an estimate of the total likely expenses to
be incurred to satisfy themselves with the reasonableness of the charges.
However, where the amount of remittance exceeds U.S.$ 100,000 or its
equivalent, full details of such remittances should be reported to Reserve
Bank on a quarterly basis.
Import of Software through Datacom.Channels/Internet
7A.26 Authorised dealers may allow remittances towards import of software
through Datacom channels/Internet and also for import of drawings and
designs through E-Mail/Fax, on production of the following documents by the
applicant, as applicable.
- A declaration from the importer that the software/drawings and designs in
question, have been actually received by him from the overseas
licensor/supplier.
- Invoice stating the details of software/drawings and designs supplied, in
support of the amount to be remitted.
- User's licence authorising the importer to use the software/drawings and
designs.
- Copies of E-mail/Fax certified by the officials of the remitter, at the
level of Company Secretary/Financial Director/ Adviser.
NOTE:- Authorised dealers should advise importers to keep Custom authorities
informed of the imports made by them under this paragraph.
Import of Second-hand Goods
7A.27
In terms of Export-Import Policy presently in force, second hand capital
goods are allowed to
be imported freely subject to certain conditions. Such imports sometimes
involve payment against
delivery of second hand plant and machinery abroad on 'as is where is
basis'. In the absence of shipping documents, it will not be possible for
authorised dealers to open letters of credit or make remittances against
such imports. Applications for opening of Letters of Credit or for making
remittances in regard to imports with such payment conditions should,
therefore, be referred to Reserve Bank for prior approval with full details.
Import of Gold/Platinum/Silver by Nominated Banks/Agencies
7A.28
Under the liberalised policy of import, Government of India has permitted
import of
gold by certain nominated agencies viz. MMTC, HHEC, STC, SBI and a few banks
authorised by Reserve Bank for sale to jewellery manufacturers, exporters,
NRIs, holders of Special Import licences and domestic users. Accordingly,
Reserve Bank would permit the nominated agencies/banks to import gold under
different arrangements, besides outright purchase on D/P basis, as follows:
- Import of Gold on loan basis
Gold loan my be availed of by nominated agencies/banks, where the loan is
denominated on the basis of the quantity of gold, subject to the following
conditions -
- The loan shall be obtained directly from the overseas supplier.
- The period of loan shall not be more than 180 days from the date of
shipment. Extension of period beyond 180 days will require prior approval of
Central Office of Reserve Bank (Imports Division)
- Rate of interest on loan shall be as per the prevailing international
practice.
- Metal account in the books of the overseas supplier, if required by the
supplier, may be maintained by the nominated agency/bank for the purpose of
routing the import transactions only. No deposits will be permitted.
- Guarantee for the loan, if required by the supplier may be furnished by the
nominated agency/bank.
- Import of gold on Suppliers' credit/ Buyers' credit basis
Suppliers' credit up to a period of 180 days may be availed of by the
nominated agencies/banks subject to the provisions of paragraph 7A.12. Prior
approval of Reserve Bank will be required if the period of credit exceeds
180 days. However, buyers' credit will require prior approval of Reserve
Bank, irrespective of the period of credit.
- Import of Gold on Consignment basis
Gold may be imported by the nominated agencies/banks on consignment basis
where the ownership of the goods will remain with the supplier and the
importer (consignee) will be acting as an agent of the supplier (consignor).
Remittances towards the cost of import shall be made as and when sales take
place as per the provisions of agreement entered into between the overseas
supplier and nominated agency/bank.
- Import of gold on unfixed price basis
The nominated agency/bank may import gold on outright purchase basis subject
to the condition that although ownership of the gold shall be passed on to
the importer at the time of import itself, the price of gold shall be fixed
later, as and when the importer sells the gold to the users.
NOTE:
Instructions contained in this paragraph would also apply to import of
platinum and silver.
Import of films on lease/rental basis
7A.29 Authorised dealers may allow remittance of rent, royalty, licence fee,
profit, etc. in connection with import of cinematograph feature films and
video films subject to the following conditions :
- Import has been made in accordance with provisions of Exim Policy in
force.
- A 'No Objection Certificate' from Central Board of Film Certification,
wherever required, has been submitted.
- Exchange Control copy of Bill of Entry for Home Consumption has been
submitted as evidence of import.
- The remittance is in accordance with the agreement entered into between
the overseas supplier and importer. A certified copy of the
contract/agreement should be retained by authorised dealer for record.
- A Chartered Accountant's certificate is produced indicating that the
payment to overseas supplier is due and the amount sought to be remitted is
as per the terms of contract.
- Undertaking/Certificate regarding payment of income-tax has been
submitted (cf. paragraph 3B.10).
PART B - IMPORTS UNDER FOREIGN LOANS/CREDITS
General
7B.1
- Proposals for raising foreign currency loans/credits viz. Buyer's
Credits, Supplier's Credits or lines of credits by firms/companies/lending
institutions, banks, etc. for financing cost of import of goods, technology
or for any other purposes other than those considered by Reserve bank in
terms of paragraph 7B.8 and 7B.8A should first be submitted to Government of
India, Ministry of Finance (Department of Economic Affairs), ECB Division,
New Delhi for necessary clearance. The proposals are considered by the
Government on merits and in light of prevailing Government policy.
- In terms of Section 8(1) of FERA 1973 no person resident in India can
borrow any foreign exchange from any person resident in or outside India
without prior permission of Reserve Bank. Similarly, Section 9(1) of the Act
places certain restrictions on persons resident in India receiving payments
from or making payments to persons resident outside India. Consequently, all
loans or credits secured by persons resident in India from non-residents as
also repayment of such loans/credits and payment of interest and other
charges thereon, require prior permission of Reserve Bank.
NOTE:
The above procedure is also applicable for import of capital goods on
financial lease basis.
Procedure for Obtaining Reserve Bank Approval
7B.2 On receipt of letter indicating the terms and conditions
regarding amount of loan/credit, rate of interest, period of repayment, etc.
from the Ministry of Finance, the borrower firm/company should
make an application in form ECB1 to the concerned office of Reserve Bank within
whose jurisdiction its Head/Registered Office is situated. On receipt of Reserve
Bank approval, the borrower firm/company may conclude the loan/credit agreement
with the overseas lender, taking care to ensure that no liability, direct or
indirect, other than that specifically approved by Government/Reserve Bank is
assumed by the borrower through the loan/credit areement. The borrower should
file the requisite number of copies of loan/credit agreement with Government.
Government will take the agreement on record under advice to the borrower if it
is found to be strictly in conformity with the approved terms. Thereafter, the
borrower should apply to Reserve Bank along with two copies of the loan
agreement for permission to effect drawal of the loan amount for utilisation
towards approved purpose/s.
Registration Number
7B.3 Reserve Bank will allot a registration number to each
foreign currency loan/credit which should invariably be quoted on all
returns/statements submitted to Reserve Bank. The number should also be quoted
on Form A-2 covering remittance of foreign exchange or rupee transfer towards
repayment of the loan/credit.
Opening of Bank Accounts in India/Abroad
7B.4 Reserve Bank may, on application, permit opening of
foreign currency bank accounts in India/abroad for retention of the loan funds
pending disbursement/utilisation. Borrowers should approach Reserve Bank giving
details of loan, name and address of the overseas bank, type of account and rate
of interest, etc.
Issue of Bank Guarantee
7B.5 Issue of guarantees in favour of foreign lenders or
suppliers (in the case of Supplier's Credits) requires approval of Reserve Bank.
While granting approval for raising the foreign currency loan/credit, Reserve
Bank will grant the required permission to the concerned authorised dealer. In
the event of invocation of the guarantee, the concerned authorised dealer may
make the necessary remittance without reference to Reserve Bank. A report
should, however, be sent to Reserve Bank giving full details citing reference to
the approval for furnishing the guarantee. A copy of the claim received from the
overseas party should be enclosed with such report.
Submission of Utilisation Statements
7B.6
- Borrowers in India are required to submit to Reserve Bank quarterly
statements in form ECB 2, in duplicate, about drawal and utilisation of the
loan amount. The statements should also contain details of all the
repayments/payments made under the loan/credit during the quarter under
report [cf. paragraph 7B.7(ii)] and submitted to Reserve Bank duly certified
by an authorised dealer by the 10th day of the month following the quarter
to which they relate. The statements in form ECB 2 should continue to be
submitted to Reserve Bank until such time the loan/credit is fully repaid
and in case of financial lease the period of lease is over. In case there
are no drawals/repayments during a particular quarter a `NIL' statement
should be submitted. In the event of default in timely submission of the
statement in form ECB 2, the borrowers shall be liable for such action as
may be deemed necessary by Reserve Bank under FERA 1973. The borrowers are
also required to submit to Reserve Bank a supplementary statement by way of
an annexure to ECB 2 in the prescribed form giving details of utilisation of
the loan/credit duly certified by the statutory auditors/chartered
accountants and supported by a complete set of documents such as Exchange
Control copy/ies of the import licence/s (where applicable), original
invoices and Exchange Control copy/ies of bill/s of entry for home
consumption evidencing import into India of goods for which the loan/credit
in question was obtained. This supplementary statement should be submitted
by the borrowers till the loan/credit is fully utilised and the supporting
documents are submitted to Reserve Bank.
- On receipt of the statements in form ECB 2, Reserve Bank will issue an
acknowledgement for receipt of the statement. It should be noted that no
remittances towards repayment of the loan/credit would be allowed by
authorised dealers/Reserve Bank until the statement in form ECB 2 has been
submitted to Reserve Bank for the last quarter and an acknowledgement
obtained therefor from Reserve Bank.
Repayment of Loan/Credit and Payment of Other Charges
7B.7
- Application for repayment of the loan/credit and/or any other charges
connected with the loan/credit is required to be made by the borrower in
form ECB 3 to the authorised dealer. The authorised dealer in turn should
refer the application to Reserve Bank, together with appropriate supporting
documents, sufficiently in advance to avoid payment of additional charges by
way of overdue/penal interest.
- Reserve Bank has been granting general permission to the authorised
dealer designated by the borrower to effect remittances towards repayment of
the loan where it is satisfied that the loan amount has been fully utilised
and the required documentary evidence regarding utilisation of the loan has
been submitted. Under the revised procedure effective June 1997, Reserve
Bank would grant general permission for repayment of the loan/credit to the
branch of the authorised dealer i.e. designated bank indicated by the
borrower in the application in form ECB 1, at the time of granting
permission to effect drawal of the loan (cf. paragraph 7B.2). The borrowers
should approach the same designated branch for making all future remittances
connected with the loan as per terms approved by Reserve Bank/Government of
India. In cases where Reserve Bank has granted such general permission,
applications for repayment of loan and interest thereon should be made to
the designated authorised dealer and the designated authorised dealer may
make the remittance subject to compliance with the conditions stipulated in
the letter of approval issued by the Government/Reserve Bank and after
ensuring that the borrower has submitted the statement in form ECB 2 to
Reserve Bank for the last quarter and obtained the acknowledgment therefor
(cf. paragraph 7 B.6)
-
- The penal interest may be allowed as per the rate indicated in the
approval letters issued by the Government/Reserve Bank. In case no rate
is mentioned in such approval letters, the authorised dealers may allow
the payment of penal interest based on the rate indicated in the
relative debit note/invoice raised by the lender, subject to the ceiling
of 2% per annum, besides the normal approved interest, provided the
relative loan agreement taken on record by the Government/Reserve Bank
contains the provision for payment of penal interest. In case of
defaults by the borrowers on three consecutive occasions, authorised
dealers should report the same, with full details, to the concerned
Regional Office of Reserve Bank.
- The borrower should report the payment of penal interest in form ECB 2
to be submitted to Reserve Bank on quarterly basis against column marked
'others' in item No.7.
- The authorised dealer should allow the remittances of interest, penal
interest and other charges only after the borrower has submitted an
Undertaking and Accountant's certificate in compliance with Income-tax
provisions(cf. paragraph 3B.10)
- Applications for remittance towards prepayment of outstanding ECB
which was earlier approved by the Government of India, should be made to
the designated branch of authorised dealer through whom the borrower is
making debt servicing payments, together with the Government approval in
original for prepayment of outstanding ECB. The designated branch of
authorised dealer may effect the remittance on behalf of their
constituent borrower based on the Government approval, under advice to
the concerned Regional Office of Reserve Bank quoting the Registration
number of the loan.
In case of prepayment of outstanding ECB approved by Reserve Bank, the
borrower is required to submit an application for prepayment of loan to
the Reserve Bank of India, Exchange Control Department, Central Office
(ECB Division), Mumbai through the designated branch of an authorised
dealer together with the following documents:-
- A certificate from Statutory Auditor to the effect that the ECB proceeds
have been utilised for the purpose for which ECB was sanctioned.
- Acknowledgement from the concerned Regional Office of Reserve Bank for
having received ECB-2 statement for the last quarter.
The designated authorised dealer may effect the remittance towards
prepayment of ECB based on the approval granted by Reserve Bank under
advice to the concerned Regional Office of Reserve Bank quoting the
Registration number allotted for the loan.
- The borrowers of foreign currency loan/credit are not permitted to use
balances in
their foreign currency accounts maintained in India or abroad as per
Reserve Bank's specific/general permission for repayment/payment of
principal/interest and any other charge connected with the loan/credit
unless (a) specific application for the proposed repayment/payment in
form ECB 3 has been made to Reserve Bank and approval obtained from
Reserve Bank (where necessary) or to the authorised dealer, as the case
may be, (b) a statement in form ECB 2 for the last calendar quarter has
been submitted to Reserve Bank and its acknowledgement obtained and (c)
Reserve Bank has granted approval for debt servicing out of funds held
in the foreign currency account.
- The designated bank should maintain proper records for each foreign
currency
loan/credit handled by it and record therein all essential particulars
of the amount of loan/credit raised, repaid and outstanding including
those remittances made through other authorised dealers. Head Offices of
authorised dealers should evolve a suitable system for maintenance of
records and supervision over remittances under foreign currency
loan/credit.
- At times borrowers desire to make remittance towards repayment of the
loan or
interest through an authorised dealer other than the designated one in
order to take advantage of the finer exchange rate available in the
forex market. In such cases, the borrower should submit his application
for remittance to the designated bank in form ECB 3 together with all
the relevant documents and obtain a letter from it in favour of the
authorised dealer through whom he proposes to effect the remittance,
along with form A 2 under proper authentication by the designated bank.
The borrower may then submit the letter and form A2 to the remitting
bank for making the remittance. The remitting bank should certify the
form A2 after effecting the remittance and forward the same to Reserve
Bank along with the relevant R Return. It should also separately send a
certificate to the designated bank indicating complete details of the
remittance (the name of the remitter and the beneficiary, currency and
amount remitted as also date and the purpose of the remittance) to
enable the latter to maintain proper record of remittances made. On
receipt of the certificate from the remitting bank, the designated bank
should verify the particulars of the remittance made and retain the
certificate for its record. The designated branch should not allow any
subsequent remittance either by itself or through another authorised
dealer, if a proper certificate from the remitting bank has not been
received for the previous remittance.
- The applicant borrowers who are permitted to remit the principal amount
and
interest in connection with their foreign currency borrowings through
designated bank should submit the statement in form ECB 2 to the office
of Reserve Bank positively within the prescribed period. In case of
failure of submission of statement as stated above, Reserve Bank may be
constrained to withdraw the facility of general permission granted for
remittances to be made through the designated bank and the applicant
would have to seek specific permission each time from Reserve Bank.
- Reserve Bank attach great importance to statement in form ECB 2 with a
view to
monitoring etc. of foreign currency borrowings. In the case of
persistent default in timely submission of statement in form ECB 2 to
Reserve Bank on more than one occasion by the applicant, Reserve Bank
would take suitable action against the defaulting borrowers.
Short Term Loans/Credits
7B.8
- Short term foreign currency loans/credits with maturities less than
three years for
the purpose of financing imports into India do not require prior
clearance from
Government of India. Applications for raising such loans/credits should
be made in form ECB 4 through an authorised dealer to the Chief General
Manager, Exchange Control Department, Central Office (IMD-II), Reserve
Bank of India, Mumbai 400 001. The proposals shall be considered by
Reserve Bank on merits of each case and in the light of prevailing
policy.
- In approved cases, Reserve Bank will issue a letter of approval
indicating the terms
and conditions under advice to the concerned authorised dealer. The
borrowers, hould thereafter, report the details of drawals, utilisation,
repayments and outstandings under the foreign currency loan/credit in
respect of each approval granted by Reserve Bank, every month in form
ECB 5, (in duplicate); one copy of ECB 5 alongwith the Annexure thereto
duly duly countersigned by the concerned authorised dealer and supported
by a complete set of documents such as Exchange Control copy of the
import licence/s [where applicable], original invoice and Exchange
Control copy/ies of Bill/s of Entry for home consumption evidencing
import of goods for which the loan/credit was obtained should be
submitted to the concerned Regional Office of Reserve Bank, and another
copy without the Annexure/documents should be submitted to the Chief
General Manager, Exchange Control Department, (IMD), Reserve Bank of
India, Central Office, Mumbai 400 001, by the 10th of the month
following the month to which it relates. In case the loan/credit has not
been drawn, a 'NIL' statement in form ECB 5 should be submitted. In the
event of default in timely submission of the statement in form ECB 5,
the borrowers shall be liable for such action as may be deemed necessary
by Reserve Bank under FERA, 1973.
- Authorised dealers may allow remittances towards loan instalments and
interest
strictly in accordance with the terms and conditions indicated in the
letter of approval issued by Reserve Bank. For this purpose, the
borrower should make an application to authorised dealer on form A2.
Foreign Currency Loans under US$ 5 million/USD 10 million Schemes
7B.8A
- Proposals from corporates/institutions for raising external
commercial borrowings (ECBs) will be considered under the following
schemes:
- USD 5 million Scheme
Raising of ECB under the scheme will be considered provided (a) the
amount to be raised does not exceed USD 5 million or its equivalent and
(b) the borrowing should be for a minimum simple maturity of three
years. Corporates/institutions may utilise the proceeds of such
borrowings for their business related expenditure (including rupee
expenditure) subject to the caveat that only one such loan should be
outstanding at any point of time.
- USD 10 million Scheme
Raising of ECBs under this scheme will be considered provided (a) the
amount to be raised does not exceed USD 10 million or its equivalent and
(b) the minimum average maturity of the loan should be of three years
under various windows i.e. Exporters/Foreign Exchange Earners Scheme,
Infrastructure Project Scheme, Long Term Borrowers Scheme and others.
The proceeds of the ECB raised under the scheme may be utilised for the
purpose for which it has been sanctioned.
Applications for raising ECB under USD 5 million Scheme or under USD 10
million Scheme should be submitted in form ECB 6 through an authorised
dealer to the Chief General manager, Exchange Control Department, ECB
Division, Central Office, Reserve Bank of India, Mumbai,400 001.
- In approved cases, Reserve Bank will issue a letter of approval
indicating the terms
and conditions of the proposed loan and allot a loan key number. On
receipt of Reserve Bank's approval, the borrower firm/company may
conclude the loan agreement with the overseas lender taking care to
ensure that no condition or financial liability, direct or indirect,
other than that specifically approved by Reserve Bank is accepted in
terms of the said loan agreement. The borrower, after concluding the
loan agreement, should file a certified true copy thereof with the
concerned Regional Office of Reserve Bank. Reserve Bank will take the
agreement on record, allot a registration number for the proposed
foreign currency loan and advise the borrower accordingly if the
agreement is found to be in conformity with approved terms. The borrower
should draw the foreign currency loan amount for utilisation towards
approved purpose(s) only after the loan agreement has been taken on
record by Reserve Bank. The Registration Number should be quoted on all
returns/statements including form A2 to be submitted to Reserve Bank.
- As regards drawal of foreign currency loan, utilisation and repayments
there against, the borrowers should follow the instructions contained in
paragraphs 7B.6 and 7B.7.
Sub-loans out of Lines of Credits/Loans obtained by Term Lending
Institutions
7B.9
Term lending institutions viz.IDBI,ICICI and IFCI have been granted
general permission for signing Heads of Agreements with their
sub-borrowers in India, without prior approval of
Reserve Bank in individual cases, in respect of sub-loans in foreign
currency sanctioned to the latter to cover the cost of capital funds and
the net amount of technical know-how fees payable, out of foreign
currency loans/lines of credit arranged by the former from overseas
institutions with the prior permission of Reserve Bank. Full details of
the documents and particulars required to be furnished by the
sub-borrowers should be ascertained from the financial institution
concerned. IDBI, ICICI and IFCI have been granted general permission to
accept personal guarantees of directors/promoters/partners/ associates
of sub-borrower companies/firms by way of collateral/ interim security,
without prior permission of Reserve Bank in each case, provided such
guarantees do not involve any direct or indirect outgo of foreign
exchange by way of guarantee commission or otherwise. It will not be
necessary for sub-borrowers to approach Reserve Bank separately for
permission for obtaining foreign currency loans through IDBI, ICICI and
IFCI or for executing personal guarantees by way of collateral/interim
security.
Loans for Purchase of Aircraft/Ships
7B.10
Airline/Shipping companies desirous of raising foreign currency
loans/credits for
financing purchase of aircraft/ships should follow the procedure
outlined in paragraph 8B.12.
Import under Foreign Loans/Credits arranged by Government of India from
Foreign Governments/Institutions
7B.11
- Import of goods under foreign loans/credits arranged by Government of
India
would be governed by the detailed instructions set out in Public Notices
issued by the
Director General of Foreign Trade/AD Circulars issued by Reserve Bank.
- Generally, one of the two methods viz. letter of commitment method or
reimbursement
method is followed for payment for imports under foreign loans/credits.
Under letter of commitment method (also called direct payment method),
payment is made direct by the loan/credit disbursing agency to foreign
suppliers whereas under reimbursement method payment to supplier is made
in the first instance by remittance through normal banking channels and
reimbursement subsequently claimed by Government of India by submitting
prescribed documents. Remittances in foreign exchange from India or
rupee transfers to non-resident accounts are not permitted in case of
imports covered by licences issued under letter of commitment method.
The manner of converting the foreign currency payments made under letter
of commitment method into rupees, and of transferring the funds for
credit of Government of India and other regulations incidental thereto
will be advised to authorised dealers from time to time. At the time of
opening letters of credit against import licences where the
reimbursement method applies, authorised dealers should make appropriate
stipulations to ensure that the prescribed documents are submitted to
them without fail. In cases where bills are received for collection in
respect of such import licences, authorised dealers should not allow
remittances until the required documents are furnished.
PART C - MERCHANTING TRADE
General
7C.1 The basic requirements to be fulfilled from the Exchange
Control angle in the case of merchanting trade or intermediary trade
transactions are that the transactions should not involve foreign exchange
outlay from India except for the normal transit period not exceeding one month;
both the legs of the intermediary trade transaction are financed through the
opening of Letters of Credit (with drafts drawn under them being of even tenor)
and such credits are on back to back terms. If the Letter of Credit to be opened
in favour of the overseas supplier is not backed up by a letter of credit from
the overseas buyer, an advance remittance for the full value should have been
received from the overseas buyer. Authorised dealers are accordingly authorised
to open letters of credit on behalf of their clients, who should be genuine
traders in goods and not mere financial intermediaries, in accordance with the
basic requirements spelt out in this paragraph and to effect remittances under
such letters of credit. They should watch foreign currency receipts from these
transactions and for this purpose should maintain suitable records.
Advance Remittances to Overseas Suppliers
7C.2 Authorised dealers may allow advance remittances by
Indian merchant exporters who are their customers to the overseas suppliers,
provided (a) confirmed orders have been received by them from the overseas
buyers, (b) authorised dealer is satisfied about the capabilities of the
merchant exporter to perform the obligations under the order, (c) the
transactions would result in adequate profit to the merchant exporter and (d)
the other conditions stipulated in paragraph 7C.1 are satisfied. Where the
amount of advance remittance exceeds US $ 15,000, a guarantee from an
international bank of repute outside India should be obtained from the overseas
seller. The concerned authorised dealer should also monitor such transactions to
ensure that they are completed and proceeds representing cost of goods supplied
to the foreign buyer are repatriated to India by the merchant exporter within a
period of six months from the date of advance payment.
PART D - IMPORT OF GOLD, SILVER, SECURITIES, CURRENCY ETC.
Import of Gold, Silver & Jewellery
7D.1 Bringing in of personal jewellery by the traveller is
regulated by the Customs under the Customs Act/Baggage Rules. Bringing in of
gold and silver would be subject to the Export and Import
Policy announced by the Government of India from time to time. Government of
India has permitted the bringing into India gold and silver upto certain
stipulated quantity by persons of Indian nationality or origin while coming into
India, subject to certain conditions and on payment of the prescribed duty in
foreign exchange. Gold/silver so brought to the country is permitted to be sold
to residents against payment in rupees. General permission has been granted by
Reserve Bank vide its Notification No.FERA 167/95-RB dated 30th May 1995 to
persons resident in India to make payment in Indian rupees to NRIs selling
gold/silver imported by them by means of a crossed cheque in India towards the
cost of gold/silver purchased by them. Authorised dealers should credit the
amounts so received only to ordinary non-resident rupee (NRO) accounts of the
concerned NRI seller.
Import of Cheques, etc.
7D.2 There are no restrictions on the import of foreign
currency cheques, drafts, bills of exchange, postal orders and such other
financial instruments but the foreign exchange so received in India should be
offered by the person receiving it for sale to an authorised dealer in India
within seven days from the date of receipt.
Import of Securities
7D.3
- There are no restrictions on the import into India of any security,
whether Indian or foreign.
- It is obligatory on the part of persons resident in India (other than
foreign nationals not permanently resident in India) to obtain Reserve
Bank's permission to acquire or hold foreign securities.
NOTE:
This will not apply to a person who has been resident outside India for a
continuous period of not less than one year, in respect of securities
acquired/held as provided in Notification No. FERA 118/92-RB dated 7th
September 1992 [See also paragraph 12.6(i)].
Import of Indian Currency
7D.4 In exercise of the powers conferred by Section 13(1) of
FERA 1973, Government of India have issued Notification No. F1/107/EC/73 dated
1st January 1974 in terms of which no person shall bring into India any Indian
currency notes or coins except with the general or special permission of Reserve
Bank. Reserve Bank by its Notification No. FERA.81/89-RB dated 9th August 1989
(as amended) has permitted import of Indian currency subject to the conditions
as under:
| (a) |
From Nepal by any person |
Currency notes of Government and Reserve Bank of India notes other
than notes of the denominations of above Rs. 100/-) |
| (b) |
From other countries by Indian travellers |
Currency notes of Government of India and Reserve Bank of India
notes up to an amount not exceeding Rs.1000 per resident Indian,
provided the amount sought to be brought into India had earlier been
taken out while proceeding abroad on a temporary visit. |
NOTE:
The above restrictions apply to import of Indian currency notes and coins. There
are no restrictions on the import of cheques, drafts, etc. drawn on banks and
expressed in Indian rupees.
Import of Foreign Exchange
7D.5 Reserve Bank has granted general permission to any person
to bring foreign currency into India from any place outside India without limit,
provided he declares to Customs authorities on arrival the particulars of all
such foreign currency brought in by him on the Currency Declaration Form (CDF).
However, if the aggregate value of foreign currency brought in by him in the
form of currency notes, bank notes or travellers cheques does not exceed U.S.$
10,000 or its equivalent, and/or the value of foreign currency notes does not
exceed U.S.$ 5,000 or its equivalent, CDF is not required to be completed.
NOTE:
Bringing in or sending into India of foreign coins is exempt from the
prohibition contained in Section 13(1) of FERA 1973 by virtue of Central
Government Notification No. F1/107/EC/73 dated 1st January 1974.