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March 13, 2002 | 1705 IST
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RBI allows exporters to Russia to go ahead without letter of credit

To boost the country's exports to Russia, the Reserve Bank of India has allowed Indian exporters to go ahead with their export contracts even before opening a letter of credit with commercial banks, according to RBI general manager (exchange control), K Ramasubramanium.

Of late, exports of commodities such as tea and tobacco have been declining to Russia due to the non-availability of bank guarantees or LCs from banks.

Highlighting the policy objective of the Foreign Exchange Management Act (FEMA) at an international trade finance seminar here, Ramasubramanium said, the RBI has also allowed the exporting community to fetch advance payment or commissions against their future exports under the current account transaction for a period of one year.

If they do not realise the export proceeds within the stipulated one-year period, the entire advance payment would be treated under the capital account transactions, he said.

Explaining the thin line dividing the current and capital account transactions under the FEMA, he said there were several definitions related to capital account transactions while not many details were mentioned related to current account transactions which were considered to be free from any prior approval.

However, there are some cases which fall under neither capital nor current account transactions which could be referred to the Government of India rules under the provision of 381e of Trade Account Convertibility.

Ramasubramanium said the basic objective of FEMA was to simplify the policy and enhance trade and investment besides developing the foreign exchange market in an orderly manner.

Towards this objective, the concerned authority has been issuing several notifications in the last two years which include 30 new notifications in the recent past.


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