Mumbai: Banks have sought regulatory clearance to close unsettled cross-border trades of clients which over the years have touched almost ₹1 lakh crore, with many unmatched entries pending for a decade.
They want Reserve Bank of India‘s permission for using new regulations that would come into force from October 1, 2026, to close millions of unreconciled exports and imports – transactions where payments are overdue for goods that were shipped, and funds were remitted but goods never landed.
The new rules allow banks to knock off old entries and sort out cases based on client declarations spelling out reasons for delays. Under the old, time-consuming regulations, banks must seek RBI’s approval in closing unresolved deals.
“Banks are unwilling to apply new regulations to close old matters (pending till September 30) unless RBI gives a go-ahead. To avoid being questioned later, banks are reluctant to use discretionary powers (under new regulations) without an RBI clearance. Banks want to resolve as many cases as possible by month-end to prevent exporters from being caution-listed for past unsettled trades,” a senior banker told ET.
It’s learnt that RBI deputy governor Rohit Jain has called a meeting with select bank CEOs this week to discuss the matter.
As per existing rules, caution-listed exporters can undertake future exports only against advance payments or letters of credit, or payment guarantees, from overseas buyers’ banks. While there’s no RBI caution list for importers, they may face scrutiny of banks and customs department for lapses. Under new rules, the practice of caution-listing would end from October 1.
“But what about past transactions for which payments are overdue? If such cases are handled under old (i.e., existing) regulations, exporters could still be caution-listed,” said the trade finance head of another bank.
According to Harshal Bhuta, partner at P. R. Bhuta & Co, which advises companies on FEMA and international tax, since the objective of new regulations is to liberalise and decentralise administration of trade regulations by empowering banks, RBI should consider allowing existing cases to also benefit from the new regime. “This would benefit numerous cases of larger write-offs, set-off of export receivables against payables for different financial periods, delayed import payments, third-party payments without the requirement of a tripartite agreement, etc,” said Bhuta. Banks can independently close outstanding trade payment entries up to ₹ 10 lakh per shipping bill or bill of entry without supporting documents.
But outstandings are often higher and even if RBI lets using new regulations to close old matters, many entries may remain unreconciled. There are cases where companies have shut down and officials can’t be located for obtaining declaration. Also, there were fly-by-night operators who remitted funds for non-existent cargo; cases were payments came from multiple banks and customers can’t locate all documents; and, mismatches due to change in address.
“The revised framework places greater responsibility on banks in monitoring and regularising export transactions. But, while this discretion may allow genuine delays and legacy issues to be addressed more efficiently, existing instances of noncompliance are not automatically regularised or extinguished,” said Moin Ladha, partner at law firm Khaitan & Co. Under the present framework, unresolved EDPMS entries may result in caution listing and associated restrictions, he said.
