Exporters have flagged at least half-a-dozen concerns on the revision in Fema rules that come into effect later this year, with the Reserve Bank of India considering several of the proposals favourably, industry executives said. RBI governor Sanjay Malhotra had met industry bodies on Thursday. Federation of Indian Export Organisations (Fieo) has flagged concerns over a fall in priority sector export credit, which was down 14% by Feb despite goods and services exports rising 4%. While Fieo and other industry bodies have raised credit flow as a major concern, particularly due to liquidity issues, banks have not responded positively. There have been demands for RBI to push for timely pre- and post-shipment credit at competitive rates along with better the transmission of interest equalisation benefits. One of the concerns around Foreign Exchange Management Act (Fema) rules relates to a provision mandating exporters to undertake exports only against receipt of full advance or receipt of irrevocable Letter of Credit if export proceeds of an exporter remain unrealised for a period beyond one year from the due date of realisation or extended period. Export bodies have argued that this will hurt exporters dealing with multiple buyers and instead proposed that the restriction should be specifically linked to the defaulting buyer and not applied across all buyers. Industry players said that RBI has responded positively. There are also suggestions to align merchanting trade transactions related to “restricted or prohibited exports” that do not touch Indian shores and involve other countries. Exporters said they face challenges regularising trade data on the EDPMS platforms that face sanctions as banks decline to process these bills due to commercial risks, leaving unregularised shipping bills outstanding and have called for a review.
