Exim Matters: RBI must rethink matching every trade entry with remittances

RBI's trade monitoring framework should move from universal transaction matching to risk-based scrutiny, balancing foreign exchange controls with ease of doing business

In my article last Monday, I suggested that the Reserve Bank of India (RBI) should replace matching of shipping bills, bills of entry and remittances through the Export Data Processing and Monitoring System (EDPMS) and Import Data Processing and Monitoring System (IDPMS) with aggregate reporting, data analytics and risk-based scrutiny. Readers have asked whether the law permits such a change and expressed concerns about misuse of trade transactions to transfer money abroad. 

Sections 7 and 8 of the Foreign Exchange Management Act, 1999 require export declarations and reasonable steps to realise and repatriate foreign exchange within the period and manner specified by RBI. They do not, however, mandate perpetual invoice-level matching through EDPMS. Removing the statutory obligation to realise export proceeds may require legislative change, but replacing universal matching with proportionate, risk-based monitoring does not. 

The Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, coming into force on October 1, consolidate the framework and delegate greater authority to authorised dealer banks. Since October 2025, RBI has allowed EDPMS and IDPMS entries of up to ₹10,00,000 to be closed on declarations by exporters or importers, individually or through quarterly bulk declarations. These are welcome reforms, but transaction matching continues. Indeed, exports of services will also enter EDPMS under the new framework. 

This philosophy goes back to the pre-liberalisation exchange-control regime. Today, each resident individual may remit up to $250,000 annually under the liberalised remittance scheme for permitted transactions. Subject to applicable conditions, including restrictions on pooling for certain capital-account transactions, a family’s aggregate permitted remittances can be substantial. Although LRS is unavailable to companies, LLPs and firms, such liberalisation weakens the presumption that every unmatched trade entry represents an attempt to accumulate personal wealth abroad. 

Official enforcement outcomes counsel against basing the monitoring architecture on assumptions about vast recoverable fortunes abroad. Until March 2025, Black Money Act assessments raised demands of ₹35,105 crore, while actual recovery was ₹338 crore, besides ₹2,476 crore collected via the 2015 compliance window. These figures do not establish the quantum of undisclosed foreign assets but show the gulf between estimates and amounts recovered. 

Trade transactions can be misused through mispricing, fictitious advances, sham service payments and related-party arrangements. Such cases merit investigation but policing every transaction is as impractical as assigning a policeman to follow every individual to prevent crime. Repeated or prolonged non-realisation, abnormal prices, high-risk jurisdictions, third-party payments and unexplained advances can be identified through analytics and examined selectively. Banks would retain underlying records and produce them whenever selected for examination, preserving an audit trail without treating every delay or mismatch as presumptively suspect from outset. In genuine transactions, commercial discipline ordinarily impels exporters to pursue receivables and importers to pursue goods paid for. 

EDPMS also supports enforcement of conditions attached to drawback, duty credits, GST refunds and duty-exemption schemes. Whether non-realisation should trigger recovery of tax remission on goods physically exported raises a separate issue. 

The period before October 1 offers RBI an opportunity to reconsider whether matching every import-export transaction should give way to aggregate reporting, with transaction-level follow-up reserved for identified risks. Otherwise, the new framework will merely make an old control system easier to administer. The more fundamental question is whether universal transaction-level control remains necessary at all.

 

Email: tncrajagopalan@gmail.com