The decision to discontinue the automatic caution-listing by the Reserve Bank of India (RBI) has been appreciated by the pharma industry stakeholders.
Under the revised procedure, an exporter would be caution-listed by the Reserve Bank based on the recommendations of the Authorised Dealer (AD) bank concerned, depending upon the exporters track record with the AD bank and investigative agencies. The AD bank would make recommendations in this regard to the regional office concerned in the foreign exchange department of the Reserve Bank in case the exporter has come to the adverse notice of the Enforcement Directorate(ED) / Central Bureau of Investigation (CBI) / Directorate of Revenue Intelligence (DRI) /any such other law enforcement agency and/or the exporter is not traceable and/or is not making sincere efforts to realise the export proceeds.
Similarly, the AD bank would also make recommendations to the Regional Office of the Reserve Bank for de-caution-listing an exporter as per the laid down procedures.
Commenting on the RBI’ notification, SV Veeramani, Chairman and MD, Fourrts Laboratories, said, “Earlier, authorised dealers (AD) have been given the powers to report under the Export Data Processing and Monitoring System (EDPMS) for recommending the exporters under caution list if their export bills are not realised beyond two years. But, this is a welcome move by the RBI, as AD is well aware of the customers’ export transaction and sincere efforts of which such long-pending realisation proceeds were initiated. It has now become more exporter friendly and the procedure is simplified.”
Nipun Jain, Chairman, Small and Medium Pharma Manufacturers Association (SMPMA) expressed, “We welcome this step initiated by the Central Government body. It was a long overdue demand of the exporters. The automated caution-listing procedures had a significant negative impact on the industry. Its repercussions were largely faced by many MSME companies that were facing the risk of getting in the caution list of RBI, especially in cases of supplying to the Office of Foreign Assets Control (OFAC) countries and third party payment transactions in those countries where Foreign Remittance is very difficult. The industry is going through a difficult phase due to the COVID-19 pandemic crisis, but this move of the RBI will impart relief to the industry.”
Anwar Daud, MD, ZIM Laboratories, opined, “The exporters should also get access to the EDPMS database, which is maintained by RBI. Presently, the database access is limited to banker’s head office only, not even the branch. Due to this, it delays the entire process, mainly because of its multiple communication levels, e.g., Exporter -> Bank Branch -> Bank HO -> Bank Branch -> Exporter. Otherwise, it is a welcome step.”
“The Reserve Bank’s decision to discontinue system-based automatic caution-listing of exporters is a big relief in the current times of COVID-19 pandemic. The Export Data Processing and Monitoring System (EDPMS) which was implemented by RBI in 2014 mandated all banks to bring all transactions with the exporters online. In 2016, RBI introduced system-based automatic caution-listing wherein exporters were put on RBI’s caution list if any shipping bill remained open for more than two years in EDPMS. Such listing makes it virtually impossible for an exporter to avail credit and also led to delay in bank documents. This positive decision will provide a big relief to exporters as in many cases the authorised dealer banks could not update their records due to lockdown and related factors of this pandemic, which threatened inclusion in the caution list. Therefore, such measures will further boost the economy as exports have grown by 5.27 per cent year-on-year to $ 27.4 billion in September”, informed Sahil Munjal, VP, Pharmexcil.
Dr Dinesh Dua, Chairman, Pharmexcil pointed out, “This RBI circular is a step in the right direction provided it’s implemented in the right spirit. Unfortunately, most PSBs have a technology deficit at times when the payments made to exporters’ A/C take a lot of time to trace. Exporters have to run from pillar to post to reconcile and provide proof to the dealing hand to trace payments. Proper technology and cooperative personnel can go a long way to facilitate this new provision.” He added, “A circular from the apex bank can only succeed if exporters’ bankers implement the same robustly.’
The background
In March 2014, the governing authority (RBI) decided to integrate the returns related to the handling of shipping bills for caution listed exporters; delayed utilisation of advances received for exports; and exports outstanding with Export Data Processing and Monitoring System (EDPMS).
The objective was to enable AD category – I banks to access the updated list of caution-listed exporters through EDPMS on a daily basis. And the list of all caution listed exporters would also be made available to AD category – I banks through their registered e-mail address. The laid down criteria for cautioning / de-cautioning of exporters in EDPMS, was:
1) The exporters would be caution listed if any shipping bill against them remains open for more than two years in EDPMS provided no extension is granted by AD Category –I bank / RBI. Date of shipment will be considered for reckoning the realisation period.
2) Once related bills are realised and closed or extension for realisation is granted, the exporter will automatically be de-caution listed.
3) The exporters can also be caution listed even before the expiry of two years period based on the recommendation of AD banks. The recommendation may be based on cases where exporter has come to adverse notice of the Enforcement Directorate (ED)/Central Bureau of Investigation (CBI /Directorate of Revenue Intelligence (DRI)/any such other law enforcement agency or the case where the exporter is not traceable or not making any serious efforts for realisation of export proceeds. In such cases, AD may forward its findings to the concerned regional office of RBI recommending the inclusion of the name of the exporter in the caution list.
4) Reserve Bank will caution/de-caution the exporters in such cases based on the recommendation of AD Category – I banks.
As part of the automation of EDPMS, the ‘Caution/De-caution Listing’ of exporters was automated in 2016. And accordingly, the exporters were to be caution-listed automatically, if any shipping bill against them remained outstanding for more than two years in EDPMS and no extension was granted for the realisation of export proceeds against the outstanding shipping bill.
However, even after revised procedures, the Reserve Bank will be continuing with caution-listing based on case-specific recommendations provided by the AD bank and related instructions in this regard will be issued shortly.