RBI aims to streamline trade for importers and exporters

India’s import and export businesses would benefit from rationalisation of the regulations proposed by the country’s central bank, the Reserve Bank of India (RBI).

Experts say that changes to the rules covering export and import transactions would simplify and streamline the processes for the trading community, describing the RBI’s initiative as “an excellent effort”.

“The move would help simplify and streamline the export-import processes,” said Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO).

The expedite this, the central bank has issued ‘Regulation of Foreign Trade under Foreign Exchange Management Act (FEMA), 1999, Draft Regulations and Directions’.

The draft says every exporter should declare the full export value of the goods or services it handles. The RBI has sought comments on the draft regulations under FEMA and direction to authorised dealer banks by 1 September 2024.

Under the proposal, banks will be able to ask exporters to produce details of their transactions before putting exporters on the ‘caution list’. Sahai said: “The time period between import and export leg, which hitherto is 120 days, is proposed to be extended to 180 days, as requested by FIEO.”

Currently, an exporter is caution-listed by RBI based on the recommendations of the bank, which looks into the exporter’s track record and possible run-ins with investigative agencies.

“However, FIEO suggested that the draft notification should align with the new Foreign Trade Policy to allow all goods under merchanting trade,” Sahai added.

Merchanting trade, also known as intermediary trade, is a trading model that involves an Indian company purchasing goods from a foreign supplier and then selling them to a foreign buyer without the goods entering or leaving India. This is used by exporters involved in agriculture and other commodities trade to hold on to the markets they have developed when restrictions on exports by the Indian government bars shipments or makes them more expensive.

At present merchanting exporters get 125 days to make a payment for goods bought overseas and receive payments for those products sold in third countries. It is proposed to increase this time period to 180 days.

Economic think tank the Global Trade Research Initiative (GTRI) said that to truly promote e-commerce from India, the RBI must incorporate two crucial changes in its draft.

GTRI said that the RBI should waive bank charges for small-value e-commerce exporters and it should accept reduced forex realisation due to discount sales.

“These two issues are major concerns for e-commerce exporters shipping packages with average values of Rs 3,000 (£28),” the think tank said.

 

New initiatives to boost women entrepreneurs’ access to finance

The Women Entrepreneurship Platform (WEP) has announced new collaborations to support women entrepreneurs by improving their access to finance.

The partnerships were unveiled at a workshop run by the Financing Women Collaborative (FWC), a WEP initiative.

Key highlights included the announcement of a partnership between MAVIM and MSC improve access to finance through alternative credit rating mechanisms, and work with banks to offer more tailored products for women entrepreneurs.

And the launch of the Shine programme, in partnership with CreditEnable, was also announced, to strengthen the credit readiness of women-led enterprises.

Additionally, SEWA Bank’s commitment to reaching out to more women entrepreneurs as a member of the Financing Women Collaborative was also announced.

Key dignitaries attending the workshop included senior officials from NITI Aayog, the leading government public policy think tank tasked with facilitating economic development; the Reserve Bank of India; the Ministry of Finance; the Ministry of Micro, Small and Medium Enterprises; public sector banks; private sector financial institutions; and women entrepreneurs.

WEP, incubated in NITI Aayog in 2018 as an aggregator platform, transitioned into a public-private partnership in 2022. WEP aims to strengthen India’s women entrepreneurship ecosystem.

It provides a forum for all ecosystem stakeholders across government, business, philanthropy and civil society to collaborate, converge, and align their initiatives towards scalable, sustainable and effective programs, enabling a larger impact for women entrepreneurs.

WEP has over 20 public and private sector partners collaborating to strengthen women entrepreneurs in India.

FWC brings together the financial service sector and organisations working with women entrepreneurs to create a supportive financing ecosystem for women.