Banks to clear old trade, payment mismatches

Mumbai: For years, missing numbers, lost documents, and wrong entries have led to mismatches between trade and payment flows, growing over time and lying unreconciled with banks.

Now, the Reserve Bank of India (RBI) has told banks in a recent meeting to reconcile the figures and close the matters.Banks will have to find ways to regularise the cases, worth thousands of crores, cross-check other documents, client statements, and track-records to conclude that these old exports and imports were indeed backed by actual, even if delayed, transfer of funds.

"We were told to look into this, take a call and sort it out.

But, in the absence of any regulatory waiver, banks would want to be in a position to explain their position if asked during annual inspection," a senior banker, who attended the meeting in June, told ET.Last October, the RBI permitted exporters and importers to close outstanding or unmatched entries up to ₹10 lakh per shipping bill or bill of entry with their authorised dealer banks on the back of a simple self-declaration.

This helped in reconciling many small cases, long unattended and mostly with state-owned banks.Addressing other cases pertaining to larger amounts could help businesses avoid being grey-listed in future and make some of the macro numbers more authentic.132501147"A large chunk of the backlog is comparatively small-value transactions.

Chasing full documentary reconciliation can be unjustifiably costly.

There's a flip side too: rulings and Enforcement Directorate (ED) actions show how unreconciled export bills left unattended for long can escalate.

An open EDPMS entry isn't dormant data - it's a compliance flag that Customs and ED can and do act on.

Here's what I feel RBI maybe signalling to banks: clear the genuine backlog quickly through self-declaration, but don't let that efficiency drive be an excuse to stop watching the entries that actually carry risk," said chartered accountant Isha Sekhri.EDPMS (or Export Data Processing and Monitoring System), introduced by RBI in 2014, is a digital platform to monitor forex flows related to exports.

But exporters and banks have faced challenges in resolving entries.

Such outstandings stem from stating different purposes in the Foreign Inward Remittance Certificate, credit notes from exporters, and unavailability of supporting documents against old entries, particularly posy mergers and amalgamations.According to Suhas Bendre, former banker and FEMA consultant, sometimes banks charge up to ₹3,000 a entry to reconcile such outstandings.

"RBI," said Bendre, "should explore an amnesty window, similar to the one introduced for Overseas Direct Investments in August 2022, for a period of one to two years for closure of EDPMS entries outstanding for over 7 years - the standard retention period for records - based on audited statements and other documents.

It may also impose a late submission fees on exporters."An exporter 'caution-listed' by regulator or ED can face financing and shipping restrictions.

Some think resolving pending issues would help banks.

"With RBI decentralising the administration of export and import regulations from October, banks are expected to face a significant increase in workload.

Besides handling cases that earlier required RBI approval, they will also begin processing service export form filings.

So, any regulatory nudge to clear pending EDPMS/IDPMS entries may be prudent," said Harshal Bhuta, partner at the CA firm P.R.

Bhuta & Co which deals with international tax and FEMA matters. ...