Settlement of Export/ Import transactions in currencies not having a direct exchange rate

Circular No.ES/66/2015-16                                                                        February 5, 2016

To : Members of the  Council

Sub: Settlement of Export/ Import transactions in currencies not having a direct exchange rate

Dear Member,

The Reserve Bank of India has issued Circular No. 42 dated February 4, 2016 to its Authorised Dealer Banks dealing with receipt and payment, in terms of which export proceeds for exports from India and import payments for imports to India may be received / made in any mode in accordance with the directions issued by the Reserve Bank of India to the Authorized Dealers from time to time.

The RBI has directed AD Banks to follow certain instructions to further liberalize the procedure and facilitate settlement of export and import transactions where the invoicing is in a freely convertible currency and the settlement takes place in the currency of the beneficiary, which though convertible, does not have a direct exchange rate, RBI has decided that AD Category-I banks may permit settlement of such export and import transactions (excluding those put through the ACU mechanism), subject to conditions as under:

1. Exporter/ Importer shall be a customer of the AD Bank,
2. Signed contract / invoice is in a freely convertible currency,
3. The beneficiary is willing to receive the payment in the currency of beneficiary instead of the original (freely convertible) currency of the invoice/ contract/ Letter of Credit as full and final settlement,
4. AD bank is satisfied with the bonafides of the transactions, and;
5. The counterparty to the exporter / importer of the AD bank is not from a country or jurisdiction in the updated FATF (Financial Action Task Force) Public Statement on High Risk & Non Co-operative Jurisdictions on which FATF has called for counter measures.

Members are requested to take note of the above.

Thanking You,

V.ANIL KUMAR
EXECUTIVE DIRECTOR