CAIIB BFM Unit 7 - Role of Exim Bank, Reserve Bank of India, Exchange Control in India - FEMA and FEDAI and Others

Exim Bank – its functions

Exim Bank (Export/Import Bank) was established in 1981 with the objective of financing Import Export Trade specially on Long term basis. The functions of Exim bank are as under:

Offering Finance for Exports at competitive rates.
Developing alternate financial solution
Data and Information about new export opportunities.
Respond to export problems and pursue Policy solutions.

The finance activities of Exim bank consist of :
Arranging Suppliers’ credit and Buyers’ credit
Consultancy and Technical services for exporters
Pre-shipment credit – over 6 months
Setting up of EOU in EPZ (Export Processing Zones)
Finance for DTA (Domestic Tariff Area) units exporting minimum 25% of annual sales.
Finance for Import of Computer System and Development of Software. Plant and Machinery
and Technical up-gradations etc.
Services for Overseas Investments.
Line of Credit to exporters on the basis of which they receive export orders.
EXIM Bank performs following functions for Commercial Banks:
Export Bills Rediscounting – Usance period should not exceed 180 days.
SSI Export Bills Rediscounting.
Refinance of Export credit
Refinance of TL to EOU, Software Capital goods up to 100%
Participates with banks in Issuance of Guarantees.

Besides above, the EXIM bank arranges Relending facilities for Overseas Banks, sanctions direct credit to foreign importers and arranges line of credit for foreign importers.

DPG (Deferred Payment Guarantees)
It is normally beyond 6M and meant for SHE (Status Holder Exporters) only.
Banks can approve proposals up to 25 crore.
Above 25 crore up to 100 crore are referred to EXIM bank.
Above 100 crore proposals will be considered by Inter institutional Working Group consisting of members from RBI, FEDAI, ECGC and EXIM.

Other services of EXIM bank
Besides above, the EXIM bank provides assistance for :
Project Exports – export of Engineering goods on Deferred Payment terms
Turnkey Projects- supply of equipment along with related services like design, detailed engineering etc.
Construction Projects
Funded facilities.
EXIM Bank is nodal agency designated by GOI to manage Export Marketing Fund (EMF) which consists of loan made available to India by World bank to promote International Trade.

Reserve Bank of India

RBI controls Foreign Exchange
RBI is empowered to
Control and regulate Foreign Exchange Reserves
Supervise Foreign Exchange dealings
Maintain external value of Rupee
FERA was replaced by FEMA in the year 1999.

FEMA provisions The important FEMA guidelines with regard to Foreign exchange are as under:
No drawl of exchange for Nepal and Bhutan
If Rupee equivalent exceeds Rs. 50000/-, payment by way of crossed cheque.
During visit abroad, one can carry Foreign currency notes up to USD 3000 or equivalent. For Libya and Iraq, the limit is USD 5000 and the entire amount for Iran and Russian states.
Indian citizens can retain and possess Foreign currency up to USD 2000 or its equivalent.
Unspent currency must be surrendered within a period of 180 days after arrival in India.
Basic Travel Quota (BTQ)
Purpose of Visit Up to USD or equivalent
Medical Treatment Abroad - 250000 per Financial year
Business Purpose                    - 250000 per visit
Employment/Immigration      - 250000
Studies                                     - 250000 per academic year
Donations/Gifts                       - 250000 per year
Debit Credit/Credit Card        - As per BTQ as above
*AD can release Foreign Exchange 60 days ahead of journey
LRS (Liberalized Remittance Scheme
The scheme is meant for Resident Indians individuals. They can freely remit up to USD 200000 per financial year in respect of any current or capital account transaction (e.g. to acquire property outside India) without prior approval of RBI. The precondition is that the remitter should have been a customer of the bank for the last 1 year. PAN is mandatory.

Not Applicable
The scheme is not applicable for remittance to Nepal, Bhutan, Pak, Mauritius or other counties identified by FATF.
The scheme is not meant for remittance by Corporate.
Import and Export of Indian Rupees
Limit is Rs. 7500/- while leaving India and while coming to India.

RETURNS TO BE SUBMITTED TO RBI
Following important returns are submitted to RBI

R- Returns - Forex Operations (Fortnightly)
BAL statement - Balance in Nostro/Vostro account
STAT 5 - Transactions in FCNR B accounts
STAT 8 - Transactions in NRE/NRO accounts
LRS Statement - UP to USD 200000 (monthly)
Trade Credit Statement - Buyers’ and Suppliers’ Credit
XOS O/S - Overdue Export bills
BEF - Import Remittance effected but Bill of Entry not submitted for >3M.
ETX Form - Seeking relaxation from RBI after expiry of 12M when export proceeds are not received.

RFC accounts Resident Foreign Currency account is opened by Indian residents who were earlier NRIs and forex is received by them from their overseas dues:
The accounts can be opened as SB/CA/FD type.
Proceeds are received from overseas.
Out of Monetary benefits accruing abroad
The funds are freely repatriable.
Minimum amount is USD 5000.

RFC- D accounts Resident Foreign Currency (Domestic) accounts are opened:
By Indian residents who visit abroad: and
Bring with them Foreign Exchange;
As honorarium, gift etc.
Unspent money can also be deposited.
These are CA nature accounts and no interest is paid.