(i) Import trade is regulated by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce & Industry, Department of Commerce, Government of India. Authorized Dealer Category – I (AD Category – I) banks should ensure that the imports into India are in conformity with the Foreign Trade Policy in force and Foreign Exchange Management (Current Account Transactions) Rules, 2000 framed by the Government of India and the Directions issued by Reserve Bank under Foreign Exchange Management Act, 1999 from time to time.

(ii) AD Category – I banks should follow normal banking procedures and adhere to the provisions of Uniform Customs and Practices for Documentary Credits (UCPDC), etc. while opening letters of credit for import into India on behalf of their constituents.

Section II – General Guidelines for Imports

B.1. General Guidelines

Rules and regulations to be followed by the AD Category – I bank from the foreign exchange angle while undertaking import payment transactions on behalf of their clients are set out in the following paragraphs. Where specific regulations do not exist, AD Category – I banks may be governed by normal trade practices. AD Category – I banks may particularly note to adhere to “Know Your Customer” (KYC) guidelines issued by Reserve Bank (Department of Banking Regulation) in all their dealings.

B.2. Remittances for Import Payments

AD Category I Banks may allow remittance for making payments for imports into India, after ensuring that all the requisite details are made available by the importer and the remittance is for bona fide trade transactions as per applicable laws in force.

B.3. Import Licences

Banks may freely open letters of credit and allow remittances for import, except for goods included in the negative list which require licenses under the Foreign Trade Policy in force.

B.4. Obligation of Purchaser of Foreign Exchange

As per FTP, any person acquiring foreign exchange is permitted to use it for the purpose mentioned in the declaration made by him to the bank.

Where foreign exchange acquired has been utilized for import of goods into India, the AD Category – I bank should ensure that the importer furnishes evidence of import.

B.5. Time Limit for Settlement of Import Payments

Within 6 months the remittance should be made for the said Import transaction. Banks may permit settlement of import dues delayed due to disputes, financial difficulties, etc.

B.6. Extension of Time

Banks can consider granting extension of time for settlement of import dues up to a period of six months at a time (maximum up to the period of three years) irrespective of the invoice value for delays on account of disputes about quantity or quality or non-fulfilment of terms of contract; financial difficulties and cases where importer has filed suit against the seller.

B.7 Advance Remittance For Import of Goods

On the basis of some predefined conditions, the bank may allow advance remittance for import of goods without any ceiling.

B.8 Interest on Import Bills

The bank may allow payment of interest on usance bills or overdue interest on delayed payments for a period of fewer than three years from the date of shipment at the rate prescribed for trade credit from time to time.

B.9 Remittances against Replacement Imports

Where goods are short-supplied, damaged or lost in transit and the Exchange Control Copy of the import licence has already been utilised to cover the opening of a letter of credit against the original goods which have been lost, the original endorsement to the extent of the value of the lost goods may be cancelled by the AD Category – I bank and fresh remittance for replacement imports may be permitted without reference to Reserve Bank, provided, the insurance claim relating to the lost goods has been settled in favour of the importer.

B.10 Receipt of Import Bills/Documents

Import bills and documents should be received from the banker of the supplier by the banker of the importer in India. AD Category – I bank should not, therefore, make remittances where import bills have been received directly by the importers from the overseas supplier, except in the following cases:

i) Where the value of import bill does not exceed USD 300,000.

(ii) Import bills received by wholly-owned Indian subsidiaries of foreign companies from their principals.

(iii) Import bills received by Status Holder Exporters as defined in the Foreign Trade Policy, 100% Export Oriented Units / Units in Special Economic Zones, Public Sector Undertakings and Limited Companies.

(iv) Import bills received by all limited companies.

B.11 Evidence of Import

In the case of imports where the value of foreign exchange remitted/paid for import into India exceeds USD 1 lac or its equivalent, the importer is required to submit the following documents to the bank through whom the related remittance was made:

a) The Exchange Control Copy of the Bill of Entry for home consumption or

b) The Exchange Control Copy of the Bill of Entry for warehousing.

B.12 Evidence of Import in Lieu (in place of or instead) of Bill of Entry

The bank may accept, in lieu of Exchange Control Copy of Bill of Entry for home consumption, a certificate from the Chief Executive Officer (CEO) or auditor of the company that the goods for which remittance was made have actually been imported into India provided:-

i) The amount of foreign exchange remitted is less than USD 1,000,000 or its equivalent and

ii) The importer is a company listed on a stock exchange in India and whose net worth is not less than Rs.100 crore as on the date of its last audited balance sheet, or, the importer is a public sector company or an undertaking of the Government of India or its departments.