Indian Banking process to write off unrealized Export Bills

TREATMENT OF UNREALIZED EXPORT BILLS BY EXPORT BANKER

According to Reserve Bank of India update as on 08th January 2021, the directions on Indian exporter bank formalities to handle unrealized export bills is given below:

C.23 “Write-off” of unrealized export bills

C.23.1. An exporter who has not been able to realize the outstanding export dues despite best efforts, may either self-write off or approach the AD Category – I banks, who had handled the relevant shipping documents, with appropriate supporting documentary evidence. The limits prescribed for write-offs of unrealized export bills are as under:

C.23.2. The above limits of self-write-off and write-off by the AD Category-1 Bank shall be reckoned cumulatively and shall be available subject to the following conditions:

a) The relevant amount has remained outstanding for more than one year;

b) Satisfactory documentary evidence is furnished indicating that the exporter had made all efforts to realise the export proceeds;

c) The exporter is a regular customer of the bank for a period of at least 6 months, is fully compliant with KYC/AML guidelines and AD Category – 1 Bank is satisfied with the bonafides of the transaction.

d) The case falls under any of the undernoted categories:

1. 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. The unrealized amount represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organization;
3. The goods exported have been auctioned or destroyed by the Port / Customs / Health authorities in the importing country;
4. The overseas buyer is not traceable over a reasonably long period of time.
5. The unrealized amount represents the undrawn balance of an export bill (not exceeding 10% of the invoice value) remaining outstanding and turned out to be unrealizable despite all efforts made by the exporter;
6. 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. 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 on dishonor of the bills by the overseas buyer and there are no prospects of realization.

C.23.3. Notwithstanding anything contained in para C.23.1 and C.23.2 above, the AD Category-1 bank may, on request of the exporter, write-off unrealised export bills without any limit in respect of cases falling under any of the categories specified at C.23.2 (d) (i), (ii) and (iii) above provided AD Category -1 bank is satisfied with the documentary evidence produced.

C.23.4. AD Category-1 banks may also permit write-off of outstanding amount of export bills up to the specified ceilings indicated in para C.23.1 above, where the documents have been directly dispatched by the exporter to the consignee or his agent resident in the country of final destination of goods if the case falls under any of the categories specified at C.23.2 (d) (i), (ii) and (iii) above.

C.23.5. The AD Category-1 banks shall ensure that the exporter seeking write-off has submitted documentary evidence towards surrendering of proportionate export incentives if any, availed of in respect of the relative export bill.

C.23.6. In case of self-write-off, the AD Category-1 bank shall obtain from the exporter, 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. This certificate shall also indicate that the export benefits, if any, availed by the exporter have been surrendered.

C.23.7. The following cases, however, would not qualify for the “write-off” facility:

1. Exports made to countries with externalization problem 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. 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.

C.23.8. AD Category – 1 banks shall report write-off of export bills in Export Data Processing and Monitoring System  (EDPMS).

C.23.9. AD banks shall put in place a system to carry out random check / percentage check of the export bills so written-off by their internal Inspectors/Auditors (including external Auditors).

C.23.10. Requests of write-off not covered under the above instructions may be referred to the Regional Office concerned of the Reserve Bank.

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