Context:
The Reserve Bank came out with revised draft regulations that cover export and import transactions under FEMA with an aim to promote ease of doing business. As per the revised draft, if the export proceeds of an exporter remain unrealised for a period beyond two years from the due date and the cumulative unrealised export proceeds of that exporter exceeds Rs 25 crore, he shall undertake further exports only against receipt of full advance or an irrevocable letter of credit.
Key Proposals in the Revised FEMA Draft
Export Proceeds Monitoring
If export proceeds remain unrealised for over two years from the due date, and the cumulative unrealised amount exceeds ₹25 crore, then the exporter must conduct future exports only against:
- 100% advance payment, or
- An irrevocable Letter of Credit (LC)
Import of Precious Metals (Gold and Silver)
- Advance remittances for importing gold or silver are not permitted
- Applies to authorised dealers facilitating such transactions
Purpose of the Revised FEMA Draft
- Enhance regulatory clarity for cross-border trade transactions
- Ensure timely realisation of export earnings
- Prevent misuse of import-export mechanisms in precious metals trade
- Align policy with global best practices to promote ease of doing business
Impact on Businesses
- Exporters with large outstanding dues must reassess risk management strategies
- Gold and silver importers must now rely on post-shipment payments, impacting procurement models
- Authorised dealers will need to update internal compliance protocols
