RBI should reconsider provisions of master circular on export of goods and services

Last Updated: Mon, Dec 10, 2012 03:58 hrs

pThe Reserve Bank of India RBI needs to revisit certain provisions in its Master Circular on Export of Goods and Services so as to make them more exporter-friendlyppThe provision relating to opening warehouses abroad says that banks may consider the applications received from exporters and grant permission for openinghiring warehouses abroad provided the applicant&rsquos export outstanding does not exceed five per cent of exports made during the previous financial yearppIt means that in a case where the exporter&rsquos previous year exports amount to Rs 100 crores banks cannot consider the application if the outstanding export proceeds exceed Rs 5 crore which works out to less than 20 days sales Most exporters cannot get their payments within 20 days and in fact quite a few extend credits to their buyers So they cannot meet the stipulated conditionppFor seeking extension and self write off by exporters the RBI says &ldquofor export proceeds due within the prescribed period during a financial year all exporters Including Status Holder exporters have been allowed to write-off including reduction in invoice value outstanding export dues and extend the prescribed period of realisation beyond 12 months or further period as applicable provided the aggregate value of such export bills written-off including reduction in invoice value and bills extended for realisation does not exceed 10 per cent of the export proceeds due during the financial year&rdquo This provision first of all is not too clearppOne can understand &ldquoexport proceeds due within the prescribed period&rdquo but not &ldquoexport proceeds due within the prescribed period during a financial period&rdquo Export proceeds due can spill over from financial year to another Secondly the provision puts an exporter who realises payments promptly at a disadvantage because his entitlements go down In other words it gives higher limit to an exporter who is tardy in realising export proceeds A provision that says &ldquoexport bills due in the financial year for which the exporter has extended the period of realisation on his own within the 10 per cent limit or sought extension of time from the AD Category &mdash I banks but unrealised as at the end of financial year will be computed for export proceeds due in the following financial year&rdquo is more confusing than some of the confounding provisions under the Income Tax lawsppRBI allows banks to extend the period of realisation of export proceeds beyond 12 months from the date of export up to a period of six months at a time irrespective of the invoice value of the export if the total outstanding of the exporter does not exceed 1 million or 10 per cent of the average export realisations during the preceding three financial years whichever is higher In a situation where the exporter can give 12 months credit the total outstanding at any point of time will be more than the limits prescribed more often than notppRBI issues a fresh Master Circular every year incorporating the changes made during the previous year However it does not help to retain year after year the provisions that are illogical or too complexly worded RBI must also review the necessity to retain outstanding or export proceeds due as the basis for determining eligibility A better basis would be export performance or outstanding beyond the permissible periodhr ppEmail a hrefmailtotncrsifycomtncrsifycoma  p

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