RBI offers greater flexibility on ‘write-off’ of unrealized export bills

As announced in Statement on Development and Regulatory Polices dated December 4, 2020, RBI revised extant procedure and delegates the grater flexibility to AD banks in respect of “write-off” of unrealized export bills.

The exporter other than the Status Holder Exporter may self-write off 5% of total export proceeds realized during the calendar year proceeding the year in which the write-off is being done. The Status holder exporter may write-off 10% of total export.AD banks may also write off 10% of export receivables of an exporter.

The above limits of self-write-off and write-off by the AD bank shall be reckoned cumulatively and shall be available subject to the condition that the relevant amount has remained outstanding for more than one year and the exporter has to show with satisfactory evidence that he has made all efforts to realize the export proceeds. Only the regular customer of the bank for a period of at least 6 months whose account is fully compliant with KYC/AML guidelines and the AD bank is satisfied with the bonafide of the transaction may allow the write-off.

The cases which falls under any of the below categories only be considered for Write-Off.

1. Where the overseas buyer has been declared insolvent and a certificate from the official liquidator, indicating that there is no possibility of recovery of export proceeds, has been produced.
2.  Where the unrealized amount which has to be written off represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organization;
3. Where the Port / Customs / Health authorities in the importing country auctioned or destroyed the goods exported.
4.  Where the overseas buyer is missing and he is not traceable over a reasonably long period of time.
5. Where the unrealized amount represents the undrawn balance of an export bill (not exceeding 10% of the invoice value) remaining outstanding that turned out to be unrealizable despite all efforts made by the exporter;
6. Where the cost of resorting to legal action would be disproportionate to the unrealized amount of the export bill or where the exporter even after winning the Court case against the overseas buyer could not execute the Court decree due to reasons beyond his control;
7. Where the Bills were drawn for the difference between the letter of credit value and actual export value or between the provisional and the actual freight charges but the amounts have remained unrealized consequent to dishonor of the bills by the overseas buyer with no prospects of realization.

In the cases of (1), (2) and (3) above on the request of the exporter, AD bank may write-off unrealized export bills without limit if the bank is satisfied with the documentary evidence produced by the exporter.This rule also applies where the exporter has directly sent the export documents to the consignee/agent subject to write-off limit mentioned above.

The exporter seeking write-off has to submit documentary evidence to the bank towards surrendering of proportionate export incentives, if any, availed of in respect of the relative export bill to be considered for write-off. A certificate from Chartered Accountant indicating the export realization in the preceding calendar year and details of the amount of write-off, if any, already availed of during the current calendar year along with the requisite details of the EDF/Export Bill under the write-off request shall be submitted to the Bank. The certificate shall also indicate that the export incentives, if any, availed by the exporter have been surrendered.

Whenever export bills written-off, AD bank shall report the same in Export Data Processing and Monitoring System (EDPMS).

The following cases do not qualify for the “write-off” facility.

1. Where exports made to countries with externalization problems i.e. where the overseas buyer has deposited the value of export in local currency but the amount has not been allowed to be repatriated by the Central Bank authorities of the country concerned.
2. Where EDF/Softex which are under investigation by agencies like, Enforcement Directorate, Directorate of Revenue Intelligence, Central Bureau of Investigation, etc. as also the outstanding bills which are subject matter of civil/criminal suit.