RBI seeks easier write-off norms after ED notice to exporters

RBI seeks easier write-off norms after ED notice to exporters

Subject : Economy

Section: Monetary policy

In News: Exporters receiving Enforcement Directorate (ED) notices for alleged violation of foreign exchange norms in reference to their unpaid receivables.

Key Points:

• RBI has recommended that the central government relax write-off norms related to unpaid receivables of exporters. (eg. A jewellery company exported the items, but never got paid)
• RBI’s master directions on the export of goods specify how such dues are to be written off.
  • As per the rules, any dues up to 5% of the total export proceeds of a company can be written off by the company itself.
  • If the dues exceed this threshold, then it would have to be written off by the authorized dealer (AD) bank.
  • In both scenarios, the exporter is required to submit supporting evidence to AD bank, which indicates that the company has tried all recovery options.
• For some companies the amount due was so small that companies did not write it off. In a few other cases, while the exporter wrote off the dues, it did not provide any supporting documents to the AD bank.
• Reason for concern is that even if the amount of write-off is small it can be used for money laundering. (as if the receivable money is not paid, it is a one way transfer of money to the other party)