| Date: |
16-07-2015
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| Notification No: |
RBI/2015-16/129 A.P. (DIR Series) Circular No.5
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| Issuing Authority: |
RBI
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| Type: |
A.P.D.(Series) Circulars
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| File No: |
RBI/2015-16/129 |
| Subject: |
Export factoring on non-recourse basis
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RBI/2015-16/129
A.P. (DIR Series) Circular No. 5
July 16, 2015
To
All Authorised Dealers in Foreign Exchange
Madam/ Sir,
Export factoring on non-recourse basis
In order to facilitate exports, Authorised Dealer Category – I (AD Category
–I) banks have been permitted to provide ‘export factoring’ services to
exporters on ‘with recourse’ basis by entering into arrangements with overseas
institutions for this purpose without prior approval from the Reserve Bank of
India subject to compliance with guidelines issued by the Department of Banking
Regulation in this regard.
- Taking into account the recommendation made by the Technical
Committee on Facilities and Services to the Exporters (Chairman: Shri G.
Padmanabhan), it has been decided to permit AD banks to factor the export
receivables on a non-recourse basis, so as to enable the exporters to
improve their cash flow and meet their working capital requirements subject
to conditions as under:
AD banks may take their own business decision to enter into export factoring
arrangement on non-recourse basis. They should ensure that their client is
not over financed. Accordingly, they may determine the working capital
requirement of their clients taking into account the value of the invoices
purchased for factoring. The invoices purchased should represent genuine
trade invoices.
In case the export financing has not been done by the Export Factor, the
Export Factor may pass on the net value to the financing bank/ Institution
after realising the export proceeds.
AD bank, being the Export Factor, should have an arrangement with the Import
Factor for credit evaluation & collection of payment.
Notation should be made on the invoice that importer has to make payment to
the Import Factor.
After factoring, the Export Factor may close the export bills and report the
same in the Export Data Processing and Monitoring System (EDPMS) of the
Reserve Bank of India.
In case of single factor, not involving Import Factor overseas, the Export
Factor may obtain credit evaluation details from the correspondent bank
abroad.
KYC and due diligence on the exporter shall be ensured by the Export Factor.
- Authorised Dealers may bring the contents of this circular to the notice
of their constituents concerned.
- The directions contained in this circular have been issued under section
10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of
1999) and are without prejudice to permissions / approvals, if any, required
under any other law.
Yours faithfully,
(A. K. Pandey)
Chief General Manager
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