RBI Policy: Details of measures announced to promote ease of doing business

Reserve Bank of India

The Reserve Bank of India (RBI) on October 1 while delivering the status quo on the rate front has announced various measures promoting ease of doing business.

These measures include consolidation of large number of circulars and directions of the RBI, measures related to strengthen export sector, and review of restrictions on transaction accounts.

Here are detailed measures announced by RBI:

Foreign currency account by Indian exporters

The RBI has decided to extend the repatriation period for export proceeds in International Financial Services Centre (IFSC) banking unit accounts to three months from one month, offering exporters more flexibility.

“It has now been decided to extend the time period for repatriation, from one month to three months, in case of such foreign currency accounts maintained in IFSC in India,” RBI governor Sanjay Malhotra said while announcing the monetary policy decision on October 1.

In January, the central bank allowed exporters to open foreign currency accounts in banks outside India for realisation of export proceeds. Funds in these accounts can be used for making import payments or have to be repatriated by the end of the next month from the date of receiving the funds.

The central bank will notify the amendments to regulations shortly.

“Extension of timelines for repatriation from foreign currency accounts of Indian exporters in IFSC and for forex outlay for Merchanting Trade Transactions, besides simplification of reconciliation processes in EDPMS/IDPMS portals are welcome steps as they will further enhance ease of doing business for the export sector,” said CS Setty, Chairman at State Bank of India and IBA.

Merchanting Trade Transaction

The RBI has eased rules under the Merchanting Trade Transaction (MTT) framework by extending the permissible period for foreign exchange outlay from four months to six months. The move comes amid persistent global trade uncertainties and supply chain disruptions, which have made it difficult for Indian merchants to fulfill their contractual obligations on time.

This relaxation is expected to provide much-needed flexibility to exporters and merchants, allowing them to complete transactions without undue pressure and safeguard their profitability.

Relaxation in compliance requirements for small value exporters/importers

The RBI has decided to simplify the process of reconciliation in Export Data Processing and Monitoring System (EDPMS) and Import Data Processing and Monitoring System (IDPMS).

As per the revised guidelines, bills can be reconciled and closed by an AD bank in EDPMS or IDPMS, based on a declaration by the concerned exporter or importer, as the case may be, that the amount has been realised, for a shipping bill, or paid against a Bill of Entry, for entries (including outstanding entries) in EDPMS/IDPMS of value equivalent to INR 10 lakh per bill, or less.

The revised procedure will also enable reduction in the realisable value of bills by AD banks based on such declaration. This measure is expected to reduce compliance burden on small value exporters and importers and enhance ease of doing business. The directions will be issued shortly.

Consolidation of Regulatory Instructions

The central bank has undertaken a major consolidation exercise to streamline its regulatory framework by bringing together the numerous circulars and directions issued over time. To enhance ease of access and reduce compliance costs for regulated entities, the central bank will consolidate existing instructions of the Department of Regulation into a comprehensive set of Master Directions on an ‘as is’ basis. Drafts of around 250 Master Directions, covering nearly 30 regulatory areas across 11 categories of regulated entities, will soon be placed on the RBI website for public comments on their completeness and accuracy.

Review of restrictions on transaction accounts
The central bank proposed to ease certain restrictions on the operation of current, cash credit, and overdraft accounts, aimed at enforcing credit discipline and improving monitoring. Based on feedback from stakeholders and experience gained, the central bank plans to provide greater flexibility to banks, particularly in dealing with borrowers regulated by financial sector regulators. Draft guidelines outlining the revised framework will be issued shortly.