RBI extends Time to close exim deals extended

Liberalising the export-import payment norms, the Reserve Bank today extended the time limit to complete such transactions to nine months from six months earlier.

"The entire merchanting or intermediary trade transactions should be completed within an overall period of nine months and there should not be any outlay of foreign exchange beyond four months," RBI said in a notification.

Among others, the RBI said such transactions should be routed through the same bank and the banks should verify the documents for genuineness of trade.

"Both the legs of a merchanting or intermediary trade transaction are routed through the same bank. The bank should verify the documents like invoice, packing list, transport documents and insurance documents and satisfy itself about the genuineness of the trade," RBI said.

It also asked the banks to ensure one-to-one matching in case of these transactions and report the defaults to the RBI on a half yearly basis.

However, in cases of repeated defaults of three cases or more in a year, banks should restrain the traders from entering into any further transaction and should consider recommending caution listing of the trader to RBI, it added.

Further, RBI said the 'merchanting' traders have to be genuine traders of goods and not mere financial intermediaries.

"Confirmed orders have to be received by them from the overseas buyers. Authorised dealer should satisfy itself about the capabilities of the merchanting trader to perform the obligations under the order. The transactions should result in reasonable profits to the merchanting trader," RBI said.