RBI should ease regulations for shipment credit
In a welcome move, the government has extended the Interest Equalization Scheme for Pre- and Post-shipment Rupee Export Credit, with the same scope and coverage, till the end of September 2021. Consequently, the extant operational instructions on the scheme issued by the Reserve Bank of India (RBI) will continue till then. The RBI, however, needs to resolve a related issue that exporters face.
The RBI Master Circular on rupee/foreign currency export credit and customer service to exporters says that the packing credit/pre-shipment credit granted to an exporter may be liquidated out of proceeds of bills drawn for the exported commodities on its purchase, discount etc., thereby converting preshipment credit into post-shipment credit. Further, sub- ject to mutual agreement between the exporter and the banker it can also be repaid/prepaid out of balances in Exchange Earners Foreign Currency A/c (EEFC A/c) as also from rupee resources of the exporter to the extent exports have actually taken place. The Master Circular also says that postshipment advance can mainly take the form of export bills purchased/discounted/negotiated, advances against bills for collection and advances against duty drawback receivable from the government.
Many exporters do not find it practical to send the export documents through the banks because of the extra costs and delays involved. They send the documents directly to the buyers. During the pandemic, the courier services were also affected and so, the buyers used to ask the exporters to consign the goods to them directly. That trend has now become the normal trade practice.
The RBI Master Direction on export of goods and services allows the exporters to send the original transport documents directly to the buyers. In such cases, the exporters can tender only the copies of such documents to the banks, which cannot be purchased/discounted/negotiated or sent for collection. So, the exporters cannot avail of the post-shipment credit or liquidate the pre-shipment export packing credit through purchase/discount/negotiation or collection of the export bills. Where the goods are consigned directly to the buyers, the shipping documents representing documents of title to the goods are not available for purchase/discount/negotiation.
The RBI can very well look at the option of allowing liquidation of pre-shipment export packing credit against submission of copies of shipping documents where the original documents have been sent directly to the buyers or the goods have been consigned directly to the buyers. Secondly, the RBI can allow post-shipment credit to the exporters against export receivables upon submission of the copies of the shipping documents. That will help the exporters who give more time to the buyers to pay for the goods.
At the ground level, most bankers take a very practical view of the present situation and current trade practices and help the exporters to the extent possible. However, there are some who take a rigid view and say that the RBI instructions do not allow post-shipment credit where original transport documents of title to the goods are not submitted to them for negotiation/purchase/discount or collection. There are situations where interest at concessional rate is denied to exporters on the grounds that original transport documents of title are not submitted to them for negotiation/purchase/discount or collection.
The RBI should review its instructions and help the exporters who consign the goods directly to the buyers or send the original documents to the buyers directly.