RBI Guidelines for Inward Remittance to India

As an exporter from India, you must know what inward remittance means. Inward remittance is the transfer of funds from outside the country into India. The basis of exports is receiving payment or inward remittance for goods exported or services delivered.

Inward remittance to India for exporters has specific guidelines that the Reserve Bank of India implements to regulate the flow of funds. To avail of inward remittance services, you must follow all the guidelines.

Let’s first understand what inward remittance means.

What is remittance in banking?

In banking, remittance refers to transferring funds into an account for various purposes, such as a gift or payment. The flow of foreign currency into the country is considered beneficial and is governed by certain RBI guidelines for inward remittance, which are subject to a foreign transaction fee. One of the ways to make this process easier is to avail the help of a cross-border payment platform.

Here are RBI’s guidelines for inward remittance for exporters

Time limit

Exporters have nine months to receive payment for the full value of the goods or services traded. The period has been extended to 12 months for special economic zones (SEZs). If required, exporters can ask the authorized dealers for an extension of the period.

Receipt modes

The proceeds of export-related trades can be received through banking channels in foreign currency, letters of credit (LC), international credit cards, or other RBI-authorized modes.

Documents required for inward remittance

Here’s a list of documents exporters must submit per RBI guidelines for inward remittance. The exporter must submit the related documents to the authorized dealer within 21 days of shipment as per RBI guidelines for inward remittance.

1. Export declaration forms like EDF, SOFTEX, etc., to the bank monitoring the export-related proceeds

2. The transaction agreement with the buyer should contain all the details of the goods or services and the payment terms

3. Foreign inward remittance certificate (FIRC) as the proof of receiving the amount

4. Purpose code, which specifies why you are receiving the payment

5. Bank account details, including the account holder's KYC, account number, branch, etc.

6. Invoice related to the export transaction with all the details about the transaction

7. Declaration forms may be required when the amounts received are on the higher side

8. The shipping bill, bill of lading, and other related documents

Compliance

Exporters must report all inward remittances per the Foreign Exchange Management Act (FEMA), 1999. According to RBI regulations, exporters and authorized dealers (banks) should carry out regular audits and monitor transactions to ensure compliance.

Foreign currency accounts

Exporters can maintain accounts like the Exchange Earners’ Foreign Currency (EEFC) to park the earnings received in foreign currency without converting to INR.

Why do we need guidelines for inward remittance?

Now that we have examined the guidelines for inward remittance related to exporters let’s dive a little deeper to understand why these transactions are so closely monitored. As you know, the influx of foreign currency into the country is great for the economy.

However, along with the positive influence, the inward remittance of foreign currency brings with it the path for many unlawful practices.

Ensure transparency

Submitting all the documents related to export-related transactions ensures transparency throughout the process. This ensures that both parties involved do not face any losses or issues related to the trade.

Prevent the laundering of money

Inward remittances risk being used by unlawful businesses or individuals for laundering money earned through underhand means. The documentation required for export-related transactions ensures that money laundering is caught and prevented.

Regulate trade

When a buyer and seller from different countries enter into a transaction for the exchange of goods or services, it is essential that both parties have fair terms. For instance, the quality of goods or services sold will be of an established standard to ensure that consumers can use it safely. At the same time, the payment terms offered to the exporter should be in keeping with the goods or services supplied and ensure a fair profit.

Economic regulation

Export trade benefits the exporting nation's economy by providing foreign currency influx, profit margins, local employment, and international recognition for the products and services sold. For the importing country, it provides the opportunity to source from other countries, offers competitive pricing, and quality goods to sell locally.

At LeRemitt, we enable cross-border remittances with a friendly platform. It makes the entire process efficient and cost-effective for businessmen who deal with cross-border transactions. We understand that each business has unique needs that must be met quickly and with complete compliance. We offer these services that scale along with your business's needs.

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