Banks move to alert ED on exporters whose payments have been delayed

MUMBAI: In the past few days, banks have shared with the Enforcement Directorate the names of thousands of exporters who have not received payments against shipment of goods. However, bankers fear the harsh move, though aimed at bringing back dollars parked abroad and curbing money laundering via under-invoicing of exports, may hit business sentiment.

RBI had set September 30 as the deadline for banks to reconcile data on exports above $25,000 with corresponding payment records by obtaining documents from companies. Clients who were unable to provide documents or failed to explain why payments for goods sold abroad were pending for two years or more could be “caution listed” if RBI does not soften its stand, senior bank officials told ET.

“We understand that the timing may not be appropriate given the fall in rupee and market volatility. But we have to report these names in the absence of a fresh directive from the regulator. We have had several meetings with RBI officials and they were very serious,” said a banker.

“We wrote many letters to these exporters, warning them about the consequences. Some are non-co-operative, some cannot be contacted, and some have genuine problems. What are we supposed to do? If we don’t act, we could be penalised by RBI,” said another banker.

The banker quoted earlier said RBI has shared with large banks data on over 91,000 exporters who have not brought back export receipts. It is unclear how banks would deal with large companies with whom they share business relationships.

A company which figures in the caution list would be unable to trade in the absence of a letter of credit (LC) arrangement, which would push up costs and could even sour its relationship with overseas buyers.

“A large number of exporters trade on open account and do not insist on LC (or guarantees) from overseas clients whom they have known for years. These exporters now fear that demanding LCs could put off their clients and even cause loss of business. It’s possible that RBI may give exporters more time given the pressure on rupee and large current account deficit, but no such directive came till Thursday evening,” said another banker.

RBI did not disclose the total unreconciled export amount, and has not commented on its decision to caution-list exporters. ET’s email to the RBI spokesperson went unanswered till the time of going to press. Thanks to digitisation of trade data (such as shipping bill number, cargo description, value, port of loading, destination port, and bank handling the transaction) which customs authorities share with RBI, any bank is able to access information on the trades in which it is involved.

A bank receiving payment reconciles the trade with the foreign currency inflow by matching the shipping bill number. In some cases reconciliation is difficult due to lost records and a lack of discipline among exporters in filing documents. “Often an exporter named bank A in the shipping document but eventually received money from bank B which might have offered a better exchange rate.

“There are instances where the exporter may have received an advance from the overseas buyer and this was never recorded with the bank which handled the final trade payment. RBI is fine as long as exporters bring in funds within nine months. But these are cases where payment is pending for years and we don’t know whether some of these can ever be reconciled,” said a trade consultant.