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For delay filing I-T returnIf you have not filed your return by the deadline, you will receive a reminder notice from the income tax department. You get this notice before the end of the assessment year for which the return is due. filing tax return where the individual has taxable income is mandated under section 139(1). The notices for non-filing by the due date are generally automated reminders which point l out the obligation under section 139(1) and remind taxpayers to file their returns to avoid penalties. "However, a notice under section 142(1)(i) may be issued requiring the taxpayer to furnish the return if not filed within the due date,If you do not file your return by the due, you will have to pay a late filing fee. Thus, if you miss the deadline and file a belated return for the current financial year before December 31, 2019, then you may have to pay a penalty of Rs 5,000. However, this penalty will increase to Rs 10000, if the ITR is filed on or after January 1, 2020.To avoid getting notice: You must file ITR before the deadline for filing ITR for a particular assessment year2. Misreporting LTCG from equityYou need to report any realised long-term capital gains (LTCG) on listed equity and equity-related mutual funds at the time of filing ITR. LTCG above Rs 1 lakh in a year on listed equity and equity-related mutual funds on which STT has been paid will be taxed at 10 percent. Reporting LTCG on equity can be a bit complex for taxpayers from the financial year 2018-19 onwards.review of high-value transactions during tax scrutiny enables tax officers to identify unreported capital gains. "While completing the assessment under section 143(3) the officers will include these as taxable incomes, charge interest on tax shortfall and initiate penalty proceedings under section 270A,"Therefore, you should ensure that you have done the right computation and have mentioned the information correctly. A simple calculation error may get you a demand notice, where the tax department can ask you to pay the tax due.To avoid getting notice: Make sure you get the statement on capital gains either from your broker or directly from the mutual fund house and then mention the correct details accordingly in the form. You should also cross check the LTCG calculation details yourself with account statements and take the help of a tax advisor in case the calculations are too numerous or complicated for you.3. For TDS claimed not matching with Form 26ASWhile filing ITR, the TDS should ideally have to be the same in Form 26AS and Form 16 or 16A. However, there can be several reasons why some details may mismatch. Notices for TDS mismatch are issued under section 143(1). The reason for getting this notice is a mismatch in the TDS reported by the deductor to the revenue authorities and the TDS claimed in the return of income by the assessee.To avoid getting notice:, "As a precaution, before filing the return of income, one could check the TDS reported in the Form 26AS and ensure that the TDS is correctly reported by various deductors and then proceed to file the return of income. If in the case of mismatch, the assessee has to approach the respective deductor to update their reporting."4. For non-disclosure of incomeRevenue authorities obtain information about income of assesses from different sources like banks, employers, tenants, mutual exchange of information between countries etc. If you have not shown some income in your ITR, then you may get a notice from the income tax department if they detect the non-reportage. Notice is issued under section 139(9) or 143(1) for non-disclosure of income.If the income tax department receives any information that some income such as bank interest income or income from shares, etc. has not been disclosed by you and the tax man is able to confirm the same, then the income tax department will l send you a notice for non-disclosure of income.To avoid getting notice: You must collect all your financial statements and list out the income sources from which you received income and then file your ITR."If an assessee misses reporting a particular source of income in the return, the same will lead to a mismatch with the data already available with the Revenue authorities resulting in the issuance of notice. Hence, before filing the return, it would be prudent to check Form26AS and the details of overseas incomes (in case of resident and ordinarily resident) like overseas bank statements, payslips etc., and ensure that all incomes reflecting therein are disclosed in the return of income."5. For not declaring investments made in the name of spouseAt times, it may happen that you would have made investments in the name of your spouse but have not shown the income from those investments in your return. In such a scenario, any income from such investments can be taxable in your hands and you have to declare it at the time of filing returns. For instance, as per the income tax law, if an asset is acquired in the name of the spouse through the income of the taxpayer, the income arising out of such asset, if any, needs to be clubbed in the hands of the taxpayer. "Generally the revenue authorities would issue a notice under Section 143(2) for detailed audit/scrutiny of the tax return filed and income generated through investment in the name of a spouse could be questioned by the authorities during the assessment proceedings. The Revenue authorities could obtain such information through various sources like banks, registrar offices etc. Failure to declare the income therein could be considered as tax evasion resulting in the addition of the income along with interest and penalty.To avoid getting notice: It is important to note that before filing the return, it would be prudent to consider the income arising to the spouse out of assets acquired out of the income of the tax payer.Clubbing of income: When you are liable to pay tax on another's income6. For filing defective returnIf you do not file the income tax return in the correct form, you will receive a defective return notice from the income tax department. You get a defective return notice under section 139(9) of the Income Tax Act. Once received, you need to respond to it within 15 days from the date of receiving the notice. In a scenario like this, if you have incorrectly filed your ITR, you may need to file a revised ITR. You must try filing the revised ITR before the deadline ends.To avoid getting notice: Check that the return form you are filing your return in is the correct one for the incomes you are reporting.Know the correct income tax return form applicable to you for FY 2018-197. If you have done high-value transactionsYou may receive a notice if you have done high-value transactions. The income tax department identifies taxpayers who have made high-value transactions in any financial year but not yet filed an income tax return. The department can ask you to mention the source of funds for making such high-value transactions. For instance, if you made large transactions through your credit card, made huge financial investments, or bought a property in a particular year, etc. In such a scenario, the income tax department can send you a notice asking you to reply stating valid reasons or file income tax return within 21 days.You may get a notice even if you have filed your return within the due date. All said, "Where the taxpayer has significant investments or high-value transactions, a notice u/s 143(2) may also be issued within 6 months from the end of the financial year in which the return is filed. This means that the taxpayer has been selected for tax scrutiny, the depth of which would depend on whether the scrutiny notice is a limited scrutiny one or regular scrutiny."To avoid getting notice: The taxpayer should send a satisfactory reply mentioning the source of income, if the departments agree, the case gets closed. Else, necessary action is taken by the income tax department if the ITR is also not filed. In case of scrutiny notice too the tax payer has to provide the information sought in the notice to the satisfaction of the income tax department.8. If your return is picked for scrutinyYou may anytime come under the taxman's lens. The department can randomly scrutinise returns to enforce tax compliance. Therefore, if you receive any notice specifically under section 143(2), it means your return filed is in under scrutiny by your Assessing Officer. The scrutiny can be related to mismatches or inaccurate reporting, return filed and all related documents, or it can be based on predefined criteria issued every year by the income tax department.When you receive any scrutiny related notice, the first thing you need to do is to check the validity of the notice and then respond to it accordingly in the specified time. If you fail to respond, the department can impose a penalty of Rs 10,000 according to section 272A of the Income Tax Act. So, if you are not able to reply, consult a professional Chartered Accountant and file a suitable reply before you get penalised.To avoid getting notice: Report all your income and other income taxable in your hands, pay full tax due and in general be tax-compliant. Keep documentary and other evidence as proof of whatever is claimed in your return so that you can use it in case of scrutiny when asked to produce the same.9. For setting off refunds against remaining tax payableIf you have claimed a refund on the tax paid but there are still some previous tax dues payable by you, the Assessing Officer (A.O) may send you a notice. The A.O will give an intimation in writing to such taxpayer of the action proposed to be taken regarding the refund claimed. The A.O can ask for the pending demands from the previous years to be adjusted with the refund amount."Notice is issued under section 245 for setting off refunds against the tax payable. In case there is an outstanding demand for the earlier tax years, the revenue authorities could issue a notice to adjust such demand against the refund claimed by the taxpayers."To avoid getting notice: Make sure you have cleared all your dues on time every assessment year before claiming a refund.aid, "It is pertinent that the taxpayers check their e-filing portal for any outstanding demand periodically and if there is a demand it has to be ensured that the responses (agreeing/disagreeing to the demand) are submitted within stipulated time (which is generally 30 days from the date of issue of such notice) failing which the authorities would proceed with the adjustment."10. For tax evasion in earlier yearsThe Income Tax Act gives the I-T department power to reassess previously filed I-T returns. that under section 147 of the Income Tax Act, the department can issue a notice to the taxpayer. An Assessing Officer can pick tax returns for reassessment based on certain pre-defined criteria. Notice for reassessment is sent only when tax officer has reasons to believe that income which was chargeable to tax has escaped assessment. This provision is normally used in cases where tax officer has reliable and corroborative evidence of high-value tax evasion,"This notice is issued in cases where the tax department is able to collate enough new information from alternative sources proving that taxpayer has by the reason of fraud, willful-misstatement or suppression of facts evaded taxes,""The tax officer also has the power to reassess any escaped income under section 148 and also initiate penalty proceedings under section 270A,"To avoid getting notice: You must file your ITR in utmost good faith and avoid evading tax.Points to note:You must respond to the notice within the stipulated time. If any scrutiny arises, provide all the relevant details or documents on time that the department seeks from you to verify the necessary details.All said, "Tax notices are issued based on tax logics built in the system and taxpayers can avoid these notices only if they ensure that tax returns are filed well within time, income details declared in ITR are in sync with AS 26, limit the use of credit cards to Rs 2 lakh in a financial year, limit the cash withdrawal and deposits in a bank account and report sale/purchase transaction of mutual funds/shares in ITR."If you do not respond to the notices, then you may have to pay a huge penalty as per income tax norms. Also, one should file one's return on time and pay the tax due, if any, within the specified period of time to avoid getting notices from the taxman. 94489 10716

Notifications(460 kb)Money Transfer Service Scheme – Revised GuidelinesRBI/2012-13/436A.P. (DIR Series) Circular No. 89March 12, 2013ToAll Authorised Persons, who are Indian Agents under Money Transfer Service SchemeMadam / Sir,Money Transfer Service Scheme – Revised GuidelinesAttention of all Authorised Persons (APs), who are Indian Agents under the Money Transfer Service Scheme (MTSS) is invited to the Notification dated June 4, 2003 on MTSS, as amended from time to time and the specific permission accorded to them under FEMA, 1999 by the Reserve Bank to undertake inward cross-border money transfer activities in India, through tie-up arrangements with Overseas Principals.2. The MTSS Guidelines have been revised in consultation with the Government of India and the revised MTSS Guidelines are in the Annex-I.3. All other instructions issued vide the said Notification ibid, as amended from time to time remain unchanged.4. These guidelines would also be applicable mutatis mutandis to all Sub Agents of the Indian Agents under MTSS and it will be the sole responsibility of the APs (Indian Agents) to ensure that their Sub Agents also adhere to these guidelines.5. Authorised Persons (Indian Agents) may bring the contents of this circular to the notice of their constituents concerned.6. The directions contained in this Circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals if any, required under any other law.Yours faithfully,(Rudra Narayan Kar)Chief General Manager--in-ChargeAnnex-IRevised Guidelines on Money Transfer Service SchemePART-ASECTION IGuidelines for permitting(authorising) Indian Agents under Money Transfer Service Scheme (MTSS):1. Introduction1.1Money Transfer Service Scheme (MTSS) is a quick and easy way of transferring personal remittances from abroad to beneficiaries in India. Only inward personal remittances into India such as remittances towards family maintenance and remittances favouring foreign tourists visiting India are permissible. No outward remittance from India is permissible under MTSS. The system envisages a tie-up between reputed money transfer companies abroad known as Overseas Principals and agents in India known as Indian Agents who would disburse funds to beneficiaries in India at ongoing exchange rates. The Indian Agent is not allowed to remit any amount to the Overseas Principal. Under MTSS the remitters and the beneficiaries are individuals only.Statutory Basis1.2 In terms of the powers granted under Section 10 (1) of the Foreign Exchange Management Act (FEMA), 1999, the Reserve Bank of India may accord necessary permission (authorization) to any person to act as an Indian Agent under the Money Transfer Service Scheme. No person can handle the business of cross-border money transfer to India in any capacity unless specifically permitted by the Reserve Bank.1.3 These guidelines lay down basic conditions for grant of permission (authorisation) to Indian Agents and renewal of existing MTSS permissions given to them. These guidelines also include guidelines for Overseas Principals and appointment of Sub-Agents by the Indian Agents. The guidelines are not exhaustive and other relevant information, security considerations, etc., will be factored into the decision of permitting an entity. These guidelines will apply to all applications pending with the Reserve Bank for new arrangements, renewal of permissions given to Indian Agents, etc. Existing Indian Agents who do not meet the eligibility norms will have to meet the norms in a phased manner with the approval of the Reserve Bank or wind up the business of money transfer immediately.2. GuidelinesEntry NormsThe applicant to become an Indian Agent should be an Authorised Dealer Category-I bank or an Authorised Dealer Category-II or a Full Fledged Money Changer (FFMC), as defined in the A.P. (DIR Series) Circular No. 25 [A.P. (FL Series) Circular No. 02] dated March 6, 2006, or a Scheduled Commercial Bank or the Department of Posts.The applicant should have minimum Net Owned Funds of Rs.50 lakh.Note :- (i) Owned Funds :- (Paid-up Equity Capital + Free reserves + Credit balance in Profit & Loss A/c) minus (Accumulated balance of loss, Deferred revenue expenditure and Other intangible assets)(ii) Net Owned Funds :- Owned funds minus the amount of investments in shares of its subsidiaries, companies in the same group, all (other) non-banking financial companies as also the book value of debentures, bonds, outstanding loans and advances made to and deposits with its subsidiaries and companies in the same group in excess of 10 per cent of the Owned funds.3. Procedure for making Applications to the Reserve BankApplication for necessary permission to act as an Indian Agent may be made to the Chief General Manager-in-Charge, Forex Markets Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Amar Building, Fort, Mumbai-400 001 and should be accompanied by the documents pertaining to its proposed Overseas Principal, as detailed in Section II below and the following documents:A declaration to the effect that no proceedings have been initiated by / are pending with the Directorate of Enforcement (DoE) / Directorate of Revenue Intelligence (DRI) or any other law enforcing authorities, against the applicant or its directors and that no criminal cases are initiated / pending against the applicant or its directors.A declaration to the effect that proper policy framework on KYC / AML / CFT, in accordance with the guidelines issued vide A.P.(DIR Series) Circular No. 18[ A.P.(FL/RL Series) Circular No. 05] dated November 27, 2009, as amended from time to time, will be put in place on obtaining permission (authorization) of the Reserve Bank and before commencement of money transfer operations.Name and address of the Overseas Principal with whom the MTSS will be conducted.Full details of the operation of the scheme by the Overseas Principal.List of branches in India and their addresses where MTSS will be conducted by the applicant.Estimated volume of business per month/year under the scheme.Audited Balance Sheet and Profit and Loss Account for the last two financial years of the applicant, if available or a copy of the latest audited accounts, with a certificate from Statutory Auditors regarding the position of the Net Owned Funds as on the date of application.Memorandum and Articles of Association of the applicant where either a provision exists for taking up money transfer business or an appropriate amendment thereto has been filed with the Company Law Board.Confidential Report from at least two of the applicant's bankers in sealed cover.Details of sister/ associated concerns of the applicant functioning in the financial sector.A certified copy of the board resolution for undertaking money transfer business by the applicant.A letter from the proposed Overseas Principal, agreeing to enter into tie up with the applicant and also to provide necessary collateral.4. Collateral requirementCollateral equivalent to 3 days' average drawings or US $ 50,000, whichever is higher, may be kept by the Overseas Principal in favour of the Indian Agent with a designated bank in India. The minimum amount of US $ 50,000 shall be kept as a foreign currency deposit while the balance amount may be kept in the form of a Bank Guarantee. The adequacy of collateral should be reviewed by Indian Agents at quarterly intervals on the basis of remittances received during the past three months.5. Other conditionsOnly cross-border personal remittances, such as, remittances towards family maintenance and remittances favouring foreign tourists visiting India shall be allowed under this arrangement. Donations/contributions to charitable institutions/trusts, trade related remittances, remittance towards purchase of property, investments or credit to NRE Accounts shall not be made through this arrangement.A cap of US $ 2500 has been placed on individual remittance under the scheme. Amounts up to Rs.50,000/- may be paid in cash to a beneficiary in India. Any amount exceeding this limit shall be paid by means of account payee cheque/ demand draft/ payment order, etc., or credited directly to the beneficiary's bank account only. However, in exceptional circumstances, where the beneficiary is a foreign tourist, higher amounts may be disbursed in cash. Full details of such transactions should be kept on record for scrutiny by the auditors/ inspectors.Only 30 remittances can be received by a single individual beneficiary under the scheme during a calendar year.6. Criteria for RBI decisions(i) The Indian Agents need to have strength and efficiency to function profitably in a highly competitive environment. As a number of Indian Agents are already functioning, permission (authorization) will be issued on a very selective basis to those who meet the above requirements, have necessary outreach and who are likely to conform to the best international and domestic standards of customer service and efficiency.(ii) The Indian Agent should commence its money transfer operations under the scheme within a period of six months from the date of issuance of permission(authorization) and inform the Central Office and the Regional Office concerned of the Foreign Exchange Department of the Reserve Bank.SECTION IIGuidelines for Overseas Principals:Indian Agents entering into arrangements with Money Transfer Operators overseas, known as Overseas Principals, may note that Overseas Principals with adequate volume of business, track record and outreach will only be considered under the scheme. Further, since the primary objective of permitting the business of money transfer business in the country is to facilitate cheaper and more efficient means of receipt of remittances, operators with limited outreach in terms of branch network in the country and localized operations overseas will not be entertained.Applicant Indian Agents should submit the following documents / comply with the following requirements, in respect of their Overseas Principals:The Overseas Principal should obtain necessary authorisation from the Department of Payment and Settlement Systems, Reserve Bank of India under the provisions of the Payment and Settlement Systems Act (PSS Act), 2007 to commence/ operate a payment system. Prior to such authorization, the Reserve Bank will verify the background and antecedents of the Overseas Principal with the help of Govt. of India,The Overseas Principal should be a registered entity, licenced by the Central Bank / Government or financial regulatory authority of the country concerned for carrying on Money Transfer Activities. The country of registration of the Overseas Principal should be AML compliant.The minimum Net Worth of Overseas Principals should be at least US $ 1 million as per the latest audited balance sheet, which should be maintained at all times. However, the Reserve Bank may consider relaxing the minimum Net Worth criterion in case of Overseas Principals incorporated in FATF member countries and are supervised by the concerned Central Bank/ Government or financial regulatory authority.The Overseas Principal should be well established in the money transfer business with a track record of operations in well regulated markets.The arrangement with Overseas Principal should result in considerably increasing access to formal money transfer facilities at both ends.The Overseas Principal should be registered with the overseas trade / Industry bodies.The Overseas Principal should have a good rating from one of the international credit rating agencies.The Overseas Principal should submit confidential reports from at least two of its bankers.The Overseas Principal should submit a report certified by independent Chartered Accountants, regarding steps taken to comply with anti money laundering norms in the home/ host country.The Overseas Principals will be fully responsible for the activities of their Agents and Sub Agents in India.Proper records of remitters as also beneficiaries pertaining to all pay-outs in India are to be maintained by the Overseas Principals. All records must be made accessible on demand to the Reserve Bank or other agencies of the Government of India, viz., Ministry of Finance, Ministry of Home Affairs, FIU-IND, etc. Full details of the remitters and the beneficiaries should be provided by the Overseas Principals, if called for.SECTION IIIGuidelines for appointment of Sub Agents by Indian Agents:1. The SchemeUnder the Scheme, Indian Agents can enter into Sub Agency agreements with entities, fulfilling certain conditions, for the purpose of undertaking money transfer business.2. Sub AgentsA Sub Agent should have a place of business, and whose bonafides are acceptable to the Indian Agent. Indian Agents are free to decide on the tenor of the arrangement as also the commission or fee through mutual agreement with the Sub Agent. The audit and on-site inspection of premises and records of the Sub Agents by the Indian Agent to be conducted at least once in a month and in a year respectively.3. Procedure for Submission of information in respect of Sub Agents by Indian AgentsIndian Agents should submit necessary information in the prescribed format (Annex-III) in soft copy form pertaining to their existing Sub Agents within one month of the date of this circular, to the respective Regional Offices of the Foreign Exchange Department of the Reserve Bank under whose jurisdiction the registered office of the Indian Agent falls, for onward submission to the Ministry of Home Affairs (MHA), Govt. of India (GoI) through the Ministry of Finance (MoF), Govt. of India (GoI). Thereafter, Indian Agents should submit on a quarterly basis necessary information in the prescribed format (Annex-III) in soft copy form pertaining to their Sub Agents appointed during a quarter within 15 days of the end of the quarter, to the respective Regional Offices of the Foreign Exchange Department of the Reserve Bank under whose jurisdiction the registered office of the Indian Agent falls for onward submission to the Ministry of Home Affairs (MHA), Govt. of India (GoI) through the Ministry of Finance (MoF), Govt. of India (GoI). In case of any objection by the MHA, the Sub Agency arrangement concerned should be terminated immediately.Indian Agents should also furnish certificates along with the information in Annex-III that the Sub Agents appointed by them comply with the eligibility norms and also they have done due diligence, wherever applicable, in respect of them.4. Due Diligence of Sub AgentsThe Indian Agents and the Overseas Principals should undertake the following minimum checks while conducting due diligence of the Sub Agents, other than ADs Cat-I, ADs Cat-II, Scheduled Commercial Banks, FFMCs and the Deptt. of Posts.existing business activities of the Sub Agent/ its position in areaShop & Establishment/ other applicable municipal certification in favour of the Sub Agentverification of physical existence of location of the Sub Agentconduct certificate of the Sub Agent from the local police authorities. (certified copy of Memorandum and Articles of Association and Certificate of Incorporation in respect of incorporated entities).Note: Although obtaining of conduct certificate of the Sub Agent from the local police authorities is non-mandatory for the Indian Agents, the Indian Agents must take due care to avoid appointing individuals/ entities as Sub Agents who have cases / proceedings initiated / pending against them by any law enforcing agencies.declaration regarding past criminal cases, cases initiated/ pending against the Sub Agent and/or its directors/ partners by any law enforcing agency, if anyPAN Card of the Sub Agents and its directors/ partnersPhotographs of the directors/ partners and the key persons of the Sub AgentThe above checks should be done on a regular basis, at least once in a year. The Indian Agents should obtain from the Sub Agents proper documentary evidence confirming the location of the Sub Agents in addition to personal visits to the site. The Indian Agents should discontinue agreements with Sub Agents who do not meet the criteria laid down above within three months from the date of this circular.5. Selection of CentersThe Indian Agents are free to select centers for operationalising the Scheme. However, this may be advised to the Reserve Bank.6. TrainingThe Indian Agents would be expected to impart training to the Sub Agents as regards operations and maintenance of records.7. Reporting, Audit and InspectionThe Indian Agents would be expected to put in place adequate arrangements for reporting of transactions by the Sub Agents to the Indian Agents (on a regular basis) in a simple format to be prescribed by them, say at monthly intervals.Regular spot audits of all locations of Sub Agents, at least on a monthly basis, should be conducted by Indian Agents. Such audits should involve a dedicated team and 'mystery customer'(Individuals acting as potential customers to experience and measure the extent up to which people and process perform as they should) concept should be used to test the compliance carried out by Sub Agents. As mentioned above, a system of inspection of the books of the Sub Agents should be put in place. The purpose of such inspection, which should be done at least once a year, would be to ensure that the money transfer business is being carried out by the Sub Agents in conformity with the terms of agreement/prevailing RBI guidelines and that necessary records are being maintained by the Sub Agents.Note:- As of now, the Indian Agents are fully responsible for the activities of their Sub Agents. While the Indian Agents will be encouraged to act as self-regulated entities, the onus of ensuring the conduct of activities of the Sub Agents in the prescribed manner will lie solely on the Indian Agents concerned and Reserve Bank of India can in no way be held responsible for the activities of the Sub Agents. Each Indian Agent would be required to conduct due diligence before appointing a Sub Agent and any irregularity observed could render the Indian Agent’s permission liable for cancellation.SECTION IVGuidelines for renewal of permission(authorization) of existing Indian Agents:1. Necessary permission to Indian Agents will be issued initially for a period of one year, which may be renewed for one to three years at a time on the basis of fulfilment of all conditions and other directions/ instructions issued by the Reserve Bank from time to time by Indian Agents.2. The applicant should be an Authorised Dealer Category-I bank or an Authorised Dealer Category-II or a Full Fledged Money Changer (FFMC), as defined in the A.P. (DIR Series) Circular No. 25 [A.P. (FL Series) Circular No. 02] dated March 6, 2006, or a Scheduled Commercial Bank or the Department of Posts.3. The Indian Agent should have minimum Net Owned Funds of Rs.50 lakh.4. Application for renewal of permission should be submitted to the Regional Office concerned of the Foreign Exchange Department of the Reserve Bank under whose jurisdiction the registered office of the Indian Agent falls along-with the documents pertaining to the Overseas Principal as detailed in Section II above and the following documents:A declaration to the effect that no proceedings have been initiated by / are pending with the Directorate of Enforcement (DoE) / Directorate of Revenue Intelligence (DRI) or any other law enforcing authorities, against the Indian Agent or its directors and that no criminal cases are initiated / pending against the Indian Agent or its directors.A write up on the KYC / AML / CFT, risk management and internal control policy framework, put in place by the Indian Agent.Audited Balance Sheet and Profit and Loss Account for the last two financial years of the Indian Agent, if available or a copy of the latest audited accounts, with a certificate from statutory auditors regarding the position of the Net Owned Funds as on the date of application.Confidential Reports from at least two of the bankers of the Indian Agent in sealed cover.Details of sister/ associated concerns of the Indian Agent functioning in the financial sector.A certified copy of the board resolution for renewal of permission.Note :- An application for the renewal of permission under MTSS shall be made not later than one month, or such other period as the Reserve Bank may prescribe, before the expiry of the permission. Where an entity submits an application for the renewal of its MTSS permission, the permission shall continue in force until the date on which the permission is renewed or the application for renewal of permission is rejected, as the case may be. No application for renewal of MTSS permission shall be made after the expiry of the permission.SECTION VInspection of Indian AgentsInspections of the Indian Agents may be conducted by the Reserve Bank under the provisions of Section 12(1) of the FEMA, 1999.SECTION VIKYC/ AML/ CFT Guidelines for the Indian AgentsDetailed instructions on Know Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating the Financing of Terrorism (CFT) for Indian Agents under MTSS in respect of cross-border inward remittance activities, in the context of the FATF Recommendations on Anti Money Laundering standards and on Combating the Financing of Terrorism have been prescribed (Annex-II).SECTION VIIGeneral InstructionsAll Overseas Principals are required to submit their annual audited balance sheet along with a certificate on Net Worth from their Statutory Auditors to the Central Office of the Foreign Exchange Department and the Department of Payment and Settlement Systems of the Reserve Bank. Similarly, all Indian Agents are required to submit their annual audited balance sheet along with a certificate from their Statutory Auditors on Net Owned Funds to the Regional offices concerned of the Foreign Exchange Department of the Reserve Bank. As the Overseas Principals and the Indian Agents are expected to maintain minimum Net Worth and Net Owned Funds respectively on an ongoing basis, they are required to bring it to the notice of the Reserve Bank immediately along with a detailed plan of restoring the Net Worth/ Net Owned Funds to the minimum required level, if there is any reduction in their Net Worth/ Net Owned Funds below the minimum level.PART-BReports / Statements1. A quarterly statement of the quantum of remittances received, as per the enclosed format (Annex-IV) should be furnished by the Indian Agents to the Regional Offices (ROs) concerned of the Foreign Exchange Department (FED) of the Reserve Bank, under whose jurisdiction their registered offices fall and Foreign Exchange Department, Forex Markets Division, Central Office, Amar Building, Fort, Mumbai-400001 within 15 days from the close of the quarter to which it relates.2. List of their additional locations should be furnished by the Indian Agents to the ROs concerned of the FED of the Reserve Bank, under whose jurisdiction their registered offices fall, on quarterly basis within 15 days from the close of the quarter to which it relates.3. Indian Agents should forward the list of their Sub Agents, Overseas Principal-Indian Agent wise along with the addresses of all the locations of their Sub Agents in excel format in soft form by emailing the same. Indian Agents should e-mail in excel format in soft form and to the concerned FED Regional Office, full updated list (names and addresses of all the locations) of the Sub Agents, whenever they appoint/ remove any Sub Agent. Indian Agents should visit the RBI website and verify the list of Sub Agents on regular intervals and any aberration to the list observed may immediately be brought to the notice of the concerned FED ROs and FED Central Office (CO). Further, Indian Agents should confirm the veracity on quarterly basis of the list placed on RBI wesbite to FED CO either in form of a letter or by e-mail within 15 days of the end of a quarter.3. A half-yearly statement of the collateral held as at the end of June and December every year, as per the enclosed format (Annex-V) should be furnished by the Indian Agents to the ROs concerned of the FED of the Reserve Bank, under whose jurisdiction their registered offices fall and Foreign Exchange Department, Forex Markets Division, Central Office, Amar Building, Fort, Mumbai-400001 within 15 days from the close of the half-year to which it relates.Annex-IIKYC/ AML/ CFT Guidelines for Indian AgentsSECTION-IKnow Your Customer (KYC) norms/Anti-Money Laundering (AML) standards/Combating the Financing of Terrorism (CFT)/Obligation of Authorised Persons (Indian Agents) under Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009 - Cross Border Inward Remittance under Money Transfer Service Scheme1. IntroductionThe offence of Money Laundering has been defined in Section 3 of the Prevention of Money Laundering Act, 2002 (PMLA) as "whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money laundering". Money Laundering can be called a process by which money or other assets obtained as proceeds of crime are exchanged for "clean money" or other assets with no obvious link to their criminal origins.2. The objectiveThe objective of prescribing KYC/AML/CFT guidelines is to prevent the system of cross border inward money transfer into India from all over the world under the MTSS from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities. KYC procedures also enable Authorised Persons, who are Indian Agents under MTSS [referred as APs (Indian Agents) hereinafter] to know/understand their customers and their financial dealings better, which in turn help them manage their risks prudently.3. Definition of CustomerFor the purpose of KYC policy, a ‘Customer’ is defined as :a person who receives occasional/ regular cross border inward remittances under MTSS;one on whose behalf a cross border inward remittance under MTSS is received (i.e., the beneficial owner)[In view of Government of India Notification dated February 12, 2010 - Rule 9, sub-rule (1A) of PML Rules - 'Beneficial Owner' means the natural person who ultimately owns or controls a client and or the person on whose behalf a transaction is being conducted, and includes a person who exercises ultimate effective control over a juridical person].4. Guidelines4.1 GeneralAPs (Indian Agents) should keep in mind that the information collected from the customer while making payment of cross border inward remittances is to be treated as confidential and details thereof are not to be divulged for cross selling or any other like purposes. APs (Indian Agents) should, therefore, ensure that information sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the guidelines issued in this regard. Any other information from the customer, wherever necessary, should be sought separately with his/her consent.4.2 KYC PolicyAPs (Indian Agents) should frame their KYC policies incorporating the following four key elements:Customer Acceptance Policy;Customer Identification Procedures;Monitoring of Transactions; andRisk Management.4.3 Customer Acceptance Policy (CAP)a) Every AP (Indian Agent) should develop a clear Customer Acceptance Policy laying down explicit criteria for acceptance of customers. The Customer Acceptance Policy must ensure that explicit guidelines are in place on the following aspects of customer relationship in the AP (Indian Agent).No remittance is received in anonymous or fictitious/ benami name(s). [APs (Indian Agents) should not allow any transaction in any anonymous or fictitious name (s) or on behalf of other persons whose identity has not been disclosed or cannot be verified in view of Government of India Notification dated June 16, 2010 Rule 9, sub-rule (1C)].Parameters of risk perception are clearly defined in terms of the nature of business activity, location of customer and his clients, mode of payments, volume of turnover, social and financial status, etc. to enable categorisation of customers into low, medium and high risk (APs may choose any suitable nomenclature, viz., level I, level II and level III). Customers requiring very high level of monitoring, e.g., Politically Exposed Persons (PEPs) may, if considered necessary, be categorised even higher.Documentation requirements and other information to be collected in respect of different categories of customers depending on perceived risk and keeping in mind the requirements of Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009, Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005, as amended from time to time, as well as instructions / guidelines issued by the Reserve Bank, from time to time.Not to make payment of any remittance where the AP (Indian Agent) is unable to apply appropriate customer due diligence measures, i.e., AP (Indian Agent) is unable to verify the identity and /or obtain documents required as per the risk categorisation due to non-cooperation of the customer or non reliability of the data/information furnished to the AP (Indian Agent). It is, however, necessary to have suitable built in safeguards to avoid harassment of the customer. In the circumstances when an AP (Indian Agent) believes that it would no longer be satisfied that it knows the true identity of the customer, the AP (Indian Agent) should file an STR with FIU-IND.Circumstances, in which a customer is permitted to act on behalf of another person/entity, should be clearly spelt out, the beneficial owner should be identified and all reasonable steps should be taken to verify his identity.b) APs (Indian Agents) should prepare a profile for each new customer, where regular cross-border inward remittances are/ expected to be received, based on risk categorisation. The customer profile may contain information relating to customer’s identity, social / financial status, etc. The nature and extent of due diligence will depend on the risk perceived by the AP (Indian Agent). However, while preparing customer profile, APs (Indian Agents) should take care to seek only such information from the customer, which is relevant to the risk category and is not intrusive. The customer profile is a confidential document and details contained therein should not be divulged for cross selling or any other purposes.c) For the purpose of risk categorisation, individuals (other than High Net Worth) and entities whose identities and sources of wealth can be easily identified and transactions by whom by and large conform to the known profile, may be categorised as low risk. Customers that are likely to pose a higher than average risk should be categorised as medium or high risk depending on customer's background, nature and location of activity, country of origin, sources of funds and his client profile, etc. APs(Indian Agents) should apply enhanced due diligence measures based on the risk assessment, thereby requiring intensive ‘due diligence’ for higher risk customers, especially those for whom the sources of funds are not clear. Examples of customers requiring enhanced due diligence include (a) non­resident customers; (b) customers from countries that do not or insufficiently apply the FATF standards; (c) high net worth individuals; (d) politically exposed persons (PEPs); (e) non-face to face customers; and (f) those with dubious reputation as per public information available, etc.d) It is important to bear in mind that the adoption of customer acceptance policy and its implementation should not become too restrictive and must not result in denial of cross border inward remittance facilities to general public.e) With a view to preventing the system of cross border inward money transfer into India from all over the world under the MTSS from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities, whenever there is suspicion of money laundering or terrorist financing or when other factors give rise to a belief that the customer does not, in fact, pose a low risk, APs (Indian Agents) should carry out full scale customer due diligence (CDD) before making payment of any remittance.4.4 Customer Identification Procedure (CIP)a) The policy approved by the Board of APs (Indian Agents) should clearly spell out the Customer Identification Procedure while making payment to a beneficiary or when the AP has a doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data. Customer identification means identifying the customer and verifying his/her identity by using reliable, independent source documents, data or information. APs (Indian Agents) need to obtain sufficient information necessary to establish, to their satisfaction, the identity of each new customer, whether regular or occasional. Being satisfied means that the AP must be able to satisfy the competent authorities that due diligence was observed based on the risk profile of the customer in compliance with the extant guidelines in place. Such risk based approach is considered necessary to avoid disproportionate cost to APs (Indian Agents) and a burdensome regime for the customers. The APs (Indian Agents) should obtain sufficient identification data to verify the identity of the customer and his address/location. For customers that are natural persons, the APs (Indian Agents) should obtain sufficient identification document /s to verify the identity of the customer and his address/location. For customers that are legal persons, the AP (Indian Agent) should (i) verify the legal status of the legal person through proper and relevant documents; (ii) verify that any person purporting to act on behalf of the legal person is so authorised and identify and verify the identity of that person; and (iii) understand the ownership and control structure of the customer and determine who are the natural persons who ultimately control the legal person. Customer identification requirements in respect of a few typical cases, especially, legal persons requiring an extra element of caution are given in paragraph 4.5 below for guidance of APs (Indian Agents). APs (Indian Agents) may, however, frame their own internal guidelines based on their experience of dealing with such persons, their normal prudence and the legal requirements as per established practices. If the AP (Indian Agent) decides to undertake such transactions in terms of the Customer Acceptance Policy, the AP (Indian Agent) should take reasonable measures to identify the beneficial owner(s) and verify his/her/their identity in a manner so that it is satisfied that it knows who the beneficial owner(s) is/are [in view of Government of India Notification dated June 16, 2010 - Rule 9 sub-rule (1A) of PML Rules].Note: Rule 9(1A) of Prevention of Money Laundering Rules, 2005 requires that every AP (Indian Agent) under MTSS shall identify the beneficial owner and take all reasonable steps to verify his identity. The term "beneficial owner" has been defined as the natural person who ultimately owns or controls a client and/or the person on whose behalf the transaction is being conducted, and includes a person who exercises ultimate effective control over a juridical person. Government of India has since examined the issue and has specified the procedure for determination of Beneficial Ownership. The procedure as advised by the Government of India is as under:A. Where the client is a person other than an individual or trust, the AP (Indian Agents) shall identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons, through the following information:The identity of the natural person, who, whether acting alone or together, or through one or more juridical person, exercises control through ownership or who ultimately has a controlling ownership interest.Explanation: Controlling ownership interest means ownership of/entitlement to more than 25 percent of shares or capital or profits of the juridical person, where the juridical person is a company; ownership of/entitlement to more than 15% of the capital or profits of the juridical person where the juridical person is a partnership; or, ownership of/entitlement to more than 15% of the property or capital or profits of the juridical person where the juridical person is an unincorporated association or body of individuals.In cases where there exists doubt under (i) as to whether the person with the controlling ownership interest is the beneficial owner or where no natural person exerts control through ownership interests, the identity of the natural person exercising control over the juridical person through other means.Explanation: Control through other means can be exercised through voting rights, agreement, arrangements, etc.Where no natural person is identified under (i) or (ii) above, the identity of the relevant natural person who holds the position of senior managing official.B. Where the client is a trust, the AP (Indian Agent) shall identify the beneficial owners of the client and take reasonable measures to verify the identity of such persons, through the identity of the settler of the trust, the trustee, the protector, the beneficiaries with 15% or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership.C. Where the client or the owner of the controlling interest is a company listed on a stock exchange, or is a majority-owned subsidiary of such a company, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such companies.b) Some close relatives, e.g., wife, son, daughter and parents, etc., who live with their husband, father / mother and son / daughter, as the case may be, may find it difficult to undertake transactions with APs (Indian Agents) as the utility bills required for address verification are not in their name. It is clarified, that in such cases, APs (Indian Agents) can obtain an identity document and a utility bill of the relative with whom the prospective customer is living along with a declaration from the relative that the said person (prospective customer) wanting to undertake a transaction is a relative and is staying with him/her. APs (Indian Agents) can use any supplementary evidence such as a letter received through post for further verification of the address. While issuing operational instructions to the branches on the subject, APs (Indian Agents) should keep in mind the spirit of instructions issued by the Reserve Bank and avoid undue hardships to individuals who are, otherwise, classified as low risk customers.c) APs (Indian Agents) should introduce a system of periodical updation of customer identification data, if there is a continuing relationship.d) An indicative list of the type of documents / information that may be relied upon for customer identification is given in SECTION-II. It is clarified that permanent correct address, as referred to in SECTION-II means the address at which a person usually resides and can be taken as the address as mentioned in a utility bill or any other document accepted by the AP for verification of the address of the customer. When there are suspicions of money laundering or financing of the activities relating to terrorism or where there are doubts about the adequacy or veracity of previously obtained customer identification data, APs (Indian Agents) should review the due diligence measures including verifying again the identity of the client and obtaining information on the purpose and intended nature of the business relationship, as the case may be. [In view of Government of India Notification dated June 16, 2010- Rule 9 sub-rule (1D) of PML Rules].e) Payment to Beneficiariesi) For payment to beneficiaries, the identification documents, as mentioned at SECTION-II, should be verified and a copy retained. The copy of identification documents obtained should contain current and legible photograph of beneficiaries. This shall continue for a period of next six months from the date of this circular, subject to submission of a copy of the identifications documents during every payment. Further, in the event of a beneficiary being discovered to have received funds on the basis of a photo ID which did not sport his/ her photograph, action would also be initiated against the Agent/ Sub Agent. Thereafter, in addition to this, the identification requirements for cash payment to beneficiary shall also include biometric identification of the beneficiary. This stipulation will ultimately be linked to UID when it is fully implemented.ii) A cap of US $ 2500 has been placed on individual remittances under the scheme. Amounts up to Rs.50,000 may be paid in cash. Any amount exceeding this limit shall be paid only by means of cheque/D.D. /P.O., etc., or credited directly to the beneficiary's bank account. However, in exceptional circumstances, where the beneficiary is a foreign tourist, higher amounts may be disbursed in cash. Only 30 remittances can be received by a single individual during a calendar year.4.5 Customer Identification Requirements – Transactions by Politically Exposed Persons (PEPs) - Indicative GuidelinesPolitically exposed persons are individuals who are or have been entrusted with prominent public functions in a foreign country, e.g., Heads of States or of Governments, senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations, important political party officials, etc. APs (Indian Agents) should gather sufficient information on any person/customer of this category intending to undertake a transaction and check all the information available on the person in the public domain. APs (Indian Agents) should verify the identity of the person and seek information about the source /s of wealth and source /s of funds before accepting the PEP as a customer. The decision to undertake a transaction with a PEP should be taken at a senior level which should be clearly spelt out in the Customer Acceptance Policy. APs (Indian Agents) should also subject such transactions to enhanced monitoring on an ongoing basis. The above norms may also be applied to transactions with the family members or close relatives of PEPs. The above norms may also be applied to customers who become PEPs subsequent to establishment of the business relationship. These instructions are also applicable to transactions where a PEP is the ultimate beneficial owner. Further, in regard to transactions in case of PEPs, it is reiterated that APs (Indian Agents) should have appropriate ongoing risk management procedures for identifying and applying enhanced CDD to PEPs, customers who are family members or close relatives of PEPs and transactions of which a PEP is the ultimate beneficial owner.4.6 Monitoring of TransactionsOngoing monitoring is an essential element of effective KYC procedures. APs (Indian Agents) can effectively control and reduce their risk only if they have an understanding of the normal and reasonable receipt of remittances of the beneficiary so that they have the means of identifying receipts that fall outside the regular pattern of activity. However, the extent of monitoring will depend on the risk sensitivity of the remittance. APs (Indian Agents) should pay special attention to all complex, unusually large receipts and all unusual patterns which have no apparent economic or visible lawful purpose. APs (Indian Agents) may prescribe threshold limits for a particular category of receipts and pay particular attention to the receipts which exceed these limits. High-risk receipts have to be subjected to intense monitoring.Every AP (Indian Agent) should set key indicators for such receipts, taking note of the background of the customer, such as the country of origin, sources of funds, the type of transactions involved and other risk factors. APs (Indian Agents) should put in place a system of periodical review of risk categorization of customers and the need for applying enhanced due diligence measures. Such review of risk categorisation of customers should be carried out periodically.APs (Indian Agents) should exercise ongoing due diligence with respect to the business relationship with every client and closely examine the transactions in order to ensure that they are consistent with their knowledge of the client, his business and risk profile and where necessary, the source of funds [In view of Government of India Notification dated June 16, 2010 -Rule 9, sub-rule (1B)]APs (Indian Agents) should examine the background and purpose of transactions with persons (including legal persons and other financial institutions) from jurisdictions included in the FATF Statements and countries that do not or insufficiently apply the FATF Recommendations. Further, if the transactions have no apparent economic or visible lawful purpose, the background and purpose of such transactions should, as far as possible, be examined and written findings together with all the documents should be retained and made available to the Reserve Bank/ other relevant authorities, on request.4.7 Attempted transactionsWhere the AP (Indian Agent) is unable to apply appropriate KYC measures due to non-furnishing of information and /or non-cooperation by the customer, the AP should not undertake the transaction. Under these circumstances, APs should make a suspicious transactions report to FIU-IND in relation to the customer, even if the transaction is not put through.4.8 Risk Managementa) The Board of Directors of the AP (Indian Agent) should ensure that an effective KYC programme is put in place by establishing appropriate procedures and ensuring effective implementation. It should cover proper management oversight, systems and controls, segregation of duties, training and other related matters. Responsibility should be explicitly allocated within the AP (Indian Agent) for ensuring that the APs’ policies and procedures are implemented effectively. APs (Indian Agents) should, in consultation with their Boards, devise procedures for creating risk profiles of their existing and new customers and apply various anti money laundering measures keeping in view the risks involved in a transaction.b) APs’ (Indian Agents) internal audit and compliance functions have an important role in evaluating and ensuring adherence to the KYC policies and procedures. As a general rule, the compliance function should provide an independent evaluation of the AP’s (Indian Agent’s) own policies and procedures, including legal and regulatory requirements. APs (Indian Agents) should ensure that their audit machinery is staffed adequately with individuals who are well-versed in such policies and procedures. The concurrent auditors should check all cross border inward remittance transactions under MTSS to verify that they have been undertaken in compliance with the anti-money laundering guidelines and have been reported whenever required to the concerned authorities. Compliance on the lapses, if any, recorded by the concurrent auditors should be put up to the Board. A certificate from the Statutory Auditors on the compliance with KYC / AML / CFT guidelines should be obtained at the time of preparation of the Annual Report and kept on record.4.9 Introduction of New TechnologiesAPs (Indian Agents) should pay special attention to any money laundering threats that may arise from new or developing technologies including transactions through internet that might favour anonymity and take measures, to prevent their use for money laundering purposes and financing of terrorism activities.4.10 Combating Financing of Terrorisma)In terms of PML Rules, suspicious transaction should include inter alia transactions which give rise to a reasonable ground of suspicion that these may involve the proceeds of an offence mentioned in the Schedule to the PMLA, regardless of the value involved. APs (Indian Agents) should, therefore, develop suitable mechanism through appropriate policy framework for enhanced monitoring of transactions suspected of having terrorist links and swift identification of the transactions and making suitable reports to the FIU-IND on priority.b) APs (Indian Agents) are advised to take into account risks arising from the deficiencies in AML/CFT regime of certain jurisdictions, viz., Iran, Uzbekistan, Pakistan, Turkmenistan, Sao Tome and Principe, Democratic People’s Republic of Korea (DPRK), Bolivia, Cuba, Ethiopia, Kenya, Myanmar, Sri Lanka, Syria, Turkey and Nigeria, as identified in FATF Statement (www.fatf-gafi.org) issued from time to time, while dealing with individuals from these jurisdictions. In addition to FATF Statements circulated by the Reserve Bank of India from time to time, (latest as on February 14, 2013, circulated vide the A.P. (DIR Series) Circular No. 71 dated January 10, 2013), APs (Indian Agents) should also consider using publicly available information for identifying countries, which do not or insufficiently apply the FATF Recommendations. All APs (Indian Agents) are accordingly advised to take into account risks arising from the deficiencies in AML/CFT regime of these countries, while entering into business relationships and transactions with persons (including legal persons and other financial institutions) from or in these countries/ jurisdictions and give special attention to these cases.4.11 Principal Officera) APs (Indian Agents) should appoint a senior management officer to be designated as Principal Officer. Principal Officer shall be located at the head/corporate office of the AP and shall be responsible for monitoring and reporting of all transactions and sharing of information as required under the law. The role and responsibilities of the Principal Officer should include overseeing and ensuring overall compliance with regulatory guidelines on KYC/ AML/ CFT issued from time to time and obligations under the Prevention of Money Laundering Act, 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009, rules and regulations made there under, as amended from time to time.The Principal Officer should also be responsible for developing appropriate compliance management arrangements across the full range of AML/CFT areas (e.g. CDD, record keeping, etc.). He will maintain close liaison with enforcement agencies, APs (Indian Agents) and any other institution which are involved in the fight against money laundering and combating financing of terrorism. To enable the Principal Officer to discharge his responsibilities, it is advised that the Principal Officer and other appropriate staff should have timely access to customer identification data and other CDD information, transaction records and other relevant information. Further, APs (Indian Agents) should ensure that the Principal Officer is able to act independently and report directly to the senior management or to the Board of Directors.b) The Principal Officer will be responsible for timely submission of CTR and STR to the FIU-IND.4.12 Maintenance of records of transactions/Information to be preserved/ Maintenance and preservation of records/ Cash and Suspicious Transactions Reporting to Financial Intelligence Unit- India (FIU-IND)Section 12 of the Prevention of Money Laundering Act (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009, casts certain obligations on the APs (Indian Agents) in regard to preservation and reporting of transaction information. APs (Indian Agents) are, therefore, advised to go through the provisions of Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009 and the Rules notified there under and take all steps considered necessary to ensure compliance with the requirements of Section 12 of the Act ibid.(i) Maintenance of records of transactionsAPs (Indian Agents) should introduce a system of maintaining proper record of transactions prescribed under Rule 3, as mentioned below:all cash transactions of the value of more than Rupees ten lakh or its equivalent in foreign currency;all series of cash transactions integrally connected to each other which have been valued below Rupees ten lakh or its equivalent in foreign currency where such series of transactions have taken place within a month and the aggregate value of such transactions exceeds Rupees ten lakh;all transactions involving receipts by non-profit organisations of value more than Rupees ten lakh or its equivalent in foreign currency [In view of Government of India Notification dated November 12, 2009 - Rule 3, sub-rule (1) clause (BA) of PML Rules];all cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security or a document has taken place facilitating the transaction; andAll suspicious transactions whether or not made in cash and by way of as mentioned in the Rules.(ii) Information to be preservedAPs (Indian Agents) are required to maintain all necessary information in respect of transactions referred to in Rule 3 to permit reconstruction of individual transactions including the following information:the nature of the transaction;the amount of the transaction and the currency in which it was denominated;the date on which the transaction was conducted; andthe parties to the transaction.(iii) Maintenance and Preservation of Recordsa) APs (Indian Agents) are required to maintain the records containing information of all transactions including the records of transactions detailed in Rule 3 above. APs (Indian Agents) should take appropriate steps to evolve a system for proper maintenance and preservation of transaction information in a manner that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities. Further, APs (Indian Agents) should maintain for at least ten years from the date of transaction between the AP and the client, all necessary records of transactions, both with residents and non-residents, which will permit reconstruction of individual transactions (including the amounts and types of currency involved, if any) so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity.b) APs (Indian Agents) should ensure that records pertaining to the identification of the customer and his address (e.g. copies of documents like passport, driving license, PAN card, voter identity card issued by the Election Commission, utility bills, etc.) obtained while undertaking the transaction, are properly preserved for at least ten years from the date of cessation of the business relationship. The identification records and transaction data should be made available to the competent authorities upon request.c) In paragraph 4.6 of this Circular, APs (Indian Agents) have been advised to pay special attention to all complex, unusual large transactions and all unusual patterns of transactions, which have no apparent economic or visible lawful purpose. It is further clarified that the background including all documents/office records / memoranda pertaining to such transactions and purpose thereof should, as far as possible, be examined and the findings at branch as well as Principal Officer’s level should be properly recorded. Such records and related documents should be made available to help auditors in their day-to-day work relating to scrutiny of transactions and also to Reserve Bank/other relevant authorities. These records are required to be preserved for ten years as is required under Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009 and Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005, as amended from time to time.(iv) Reporting to Financial Intelligence Unit – Indiaa) In terms of the PML rules, APs (Indian Agents) are required to report information relating to cash and suspicious transactions to the Director, Financial Intelligence Unit-India (FIU-IND) in respect of transactions referred to in Rule 3 at the following address:The Director,Financial Intelligence Unit-India (FIU-IND),6th Floor, Hotel Samrat,Chanakyapuri, New Delhi-110021.Website - http://fiuindia.gov.in/b) APs (Indian Agents) should carefully go through all the reporting formats. There are altogether four reporting formats, as detailed in SECTION-III, viz. i) Cash Transactions Report (CTR); ii) Electronic File Structure-CTR; iii) Suspicious Transactions Report (STR); and iv) Electronic File Structure-STR. The reporting formats contain detailed guidelines on the compilation and manner/procedure of submission of the reports to FIU-IND. It would be necessary for APs (Indian Agents) to initiate urgent steps to ensure electronic filing of all types of reports to FIU-IND. The related hardware and technical requirement for preparing reports in an electronic format, the related data files and data structures thereof are furnished in the instructions part of the formats concerned.c) In terms of instructions contained in paragraph 4.3(b) of this Circular, APs (Indian Agents) are required to prepare a profile for each customer based on risk categorisation. Further, vide paragraph 4.6, the need for periodical review of risk categorisation has been emphasized. It is, therefore, reiterated that APs (Indian Agents), as a part of transaction monitoring mechanism, are required to put in place an appropriate software application to throw alerts when the transactions are inconsistent with risk categorization and updated profile of customers. It is needless to add that a robust software throwing alerts is essential for effective identification and reporting of suspicious transactions.4.13 Cash and Suspicious Transaction ReportsA) Cash Transaction Report (CTR)While detailed instructions for filing all types of reports are given in the instructions part of the related formats, APs (Indian Agents) should scrupulously adhere to the following:i) The Cash Transaction Report (CTR) for each month should be submitted to the FIU‑IND by 15th of the succeeding month. Cash transaction reporting by branches to their controlling offices should, therefore, invariably be submitted on a monthly basis and APs (Indian Agents) should ensure to submit CTR for every month to FIU-IND within the prescribed time schedule.ii) While filing CTR, details of individual transactions below Rs.50,000 need not be furnished.iii) CTR should contain only the transactions carried out by the AP on behalf of their customers excluding transactions between the internal accounts of the APiv) A cash transaction report for the AP as a whole should be compiled by the Principal Officer of the AP every month in physical form as per the format specified. The report should be signed by the Principal Officer and submitted to the FIU-IND.v) In case of Cash Transaction Reports (CTR) compiled centrally by APs (Indian Agents) for the branches at their central data centre level, APs (Indian Agents) may generate centralised Cash Transaction Reports (CTR) in respect of branches under central computerized environment at one point for onward transmission to FIU-IND, provided:The CTR is generated in the format prescribed by Reserve Bank in Para 4.12(iv)(b) of this Circular.A copy of the monthly CTR submitted on its behalf to the FIU-IND is available at the branch concerned for production to auditors/inspectors, when asked for.The instruction on ‘Maintenance of records of transactions’, ‘Information to be preserved’ and ‘Maintenance and Preservation of records’ as contained above in this circular at Para 4.12 (i), (ii) and (iii) respectively are scrupulously followed by the branch.However, in respect of branches not under central computerized environment, the monthly CTR should be compiled and forwarded by the branch to the Principal Officer for onward transmission to the FIU-IND.B) Suspicious Transaction Reports (STR)i) While determining suspicious transactions, APs (Indian Agents) should be guided by definition of suspicious transaction contained in PML Rules, as amended from time to time.ii) It is likely that in some cases, transactions are abandoned/ aborted by customers on being asked to give some details or to provide documents. It is clarified that APs (Indian Agents) should report all such attempted transactions in STRs, even if not completed by customers, irrespective of the amount of the transaction.iii) APs (Indian Agents) should make STRs if they have reasonable ground to believe that the transaction, including an attempted transaction, involves proceeds of crime generally irrespective of the amount of transaction and/or the threshold limit envisaged for predicate offences in part B of Schedule of Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009.iv) The Suspicious Transaction Report (STR) should be furnished within 7 days of arriving at a conclusion that any transaction, including an attempted transaction, whether cash or non-cash, or a series of transactions integrally connected are of suspicious nature. The Principal Officer should record his reasons for treating any transaction or a series of transactions as suspicious. It should be ensured that there is no undue delay in arriving at such a conclusion once a suspicious transaction report is received from a branch or any other office. Such report should be made available to the competent authorities on request.v) In the context of creating KYC/ AML awareness among the staff and for generating alerts for suspicious transactions, APs (Indian Agents) may consider the following indicative list of suspicious activities.Some possible suspicious activity indicators are given below:Customer is reluctant to provide details / documents on frivolous grounds.The transaction is undertaken by one or more intermediaries to protect the identity of the beneficiary or hide their involvement.Large amount of remittances.Size and frequency of transactions is high considering the normal business of the customer.The above list is only indicative and not exhaustive.vi) APs (Indian Agents) should not put any restrictions on payment to beneficiaries where an STR has been made. Moreover, it should be ensured that employees of APs shall keep the fact of furnishing such information as strictly confidential and there is no tipping off to the customer at any level.4.14 Customer Education/Employees’ Training/Employees’ Hiringa) Customer EducationImplementation of KYC procedures requires APs (Indian Agents) to demand certain information from customers which may be of personal nature or which has hitherto never been called for. This can sometimes lead to a lot of questioning by the customer as to the motive and purpose of collecting such information. There is, therefore, a need for APs (Indian Agents) to prepare specific literature/ pamphlets, etc., so as to educate the customer of the objectives of the KYC programme. The front desk staff needs to be specially trained to handle such situations while dealing with customers.b) Employees’ TrainingAPs (Indian Agents) must have an ongoing employee training programme so that the members of the staff are adequately trained to be aware of the policies and procedures relating to prevention of money laundering, provisions of the PMLA and the need to monitor all transactions to ensure that no suspicious activity is being undertaken under the guise of remittances. Training requirements should have different focuses for frontline staff, compliance staff and staff dealing with new customers. It is crucial that all those concerned fully understand the rationale behind the KYC policies and implement them consistently. The steps to be taken when the staff come across any suspicious transactions (such as asking questions about the source of funds, checking the identification documents carefully, reporting immediately to the Principal Officer, etc.) should be carefully formulated by the APs (Indian Agents) and suitable procedure laid down. The APs (Indian Agents) should have an ongoing training programme for consistent implementation of the AML measures.c) Hiring of EmployeesIt may be appreciated that KYC norms/AML standards/CFT measures have been prescribed to ensure that criminals are not allowed to misuse the system of money transfer under MTSS. It would, therefore, be necessary that adequate screening mechanism is put in place by APs (Indian Agents) as an integral part of their recruitment/hiring process of personnel to ensure high standards.Note:- (i) The Government of India had constituted a National Money Laundering / Financing of Terror Risk Assessment Committee to assess money laundering and terror financing risks, a national AML/CFT strategy and institutional framework for AML/CFT in India. Assessment of risk of Money Laundering /Financing of Terrorism helps both the competent authorities and the regulated entities in taking necessary steps for combating ML / FT adopting a risk-based approach. This helps in judicious and efficient allocation of resources and makes the AML / CFT regime more robust. The Committee has made recommendations regarding adoption of a risk-based approach, assessment of risk and putting in place a system which would use that assessment to take steps to effectively counter ML / FT. The recommendations of the Committee have since been accepted by the Government of India and need to be implemented. Accordingly, APs (Indian Agents) should take steps to identify and assess their ML/TF risk for customers, countries and geographical areas as also for products/ services/ transactions/delivery channels, in addition to what has been prescribed in the paragraph 4 above. APs (Indian Agents) should have policies, controls and procedures, duly approved by their boards, in place to effectively manage and mitigate their risk adopting a risk-based approach as discussed above. As a corollary, APs (Indian Agents) would be required to adopt enhanced measures for products, services and customers with a medium or high risk rating. APs (Indian Agents) may design risk parameters according to their activities for risk based transaction monitoring, which will help them in their own risk assessment.(ii) The above KYC/ AML/ CFT Guidelines would also be applicable mutatis mutandis to all Sub Agents of the Indian Agents under MTSS and it will be the sole responsibility of the APs (Indian Agents) to ensure that their Sub Agents also adhere to these guidelines.Section -IICustomer Identification Procedure Features to be verified and documents that may be obtained from customersFeaturesDocuments- Legal name and any other names used(i) Passport (ii) PAN card (iii) Voter’s Identity Card (iv) Driving licence (v) Identity card (subject to the AP’s satisfaction) (vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of the AP(Indian Agent)- Correct permanent address(i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized public authority (iv) Electricity bill (v) Ration card (vi) Letter from employer (subject to satisfaction of the AP).(any one of the documents, which provides customer information to the satisfaction of the AP (Indian Agent) will suffice).Note :- If the address on the document submitted for identity proof by the prospective customer is same as that declared by him/her, the document may be accepted as a valid proof of both identity and address. If the address indicated on the document submitted for identity proof differs from the current address declared by the customer, a separate proof of address should be obtained.Section-IIIList of various reports and their formatsCash Transaction Report (CTR)Electronic File Structure- CTRSuspicious Transaction Report (STR)Electronic File Structure-STRNote: FIU-IND have now advised that the 'go-live' date is October 20, 2012 and that Authorised Persons, who are Indian agents under MTSS may discontinue submission of reports in CD format after October 20, 2012, using only FINnet gateway for uploading of reports in the new XML reporting format. Any report in CD format received after October 20, 2012 will not be treated as a valid submission by FIU-IND.Annex-IIIFormat for Sub Agents of Indian Agents of MTSS1.Name of the Sub Agent2.Sub Agent Category (AD Cat-I bank/ AD Cat-II/ Other Scheduled Commercial Bank/ Full Fledged Money Changer/ Department of Posts/ Registered NBFC/ Others)3.Address of the registered/corporate/administrative office with telephone number/s, Fax number/s and e-mail id/s.4.Registered with5.Registration Number6.Details of Registration (papers to be attached as at Annex-IIIa)7.PAN Number (copy as at Annex-IIIa)8.Name/s of Banker/s and Bank Account Number/s (enclosures as at Annex-IIIa)9.Details (Name, Nationality, Residential address, Controlling interest in any other company, PAN Number) of each promoter with more than 10% equity holding10.Paid up capital in Rs. and Number of shares11.Accounts certified by which Chartered Accountant? Details (Enclosures as at Annex-IIIa)12.Whether prosecuted/ convicted for criminal/ economic offence? If yes, particulars thereof (Enclosures as at Annex-IIIa)13.Whether the Sub Agent is solvent as on date14.Details (Name, Designation, Nationality, Residential address, PAN No., Name/s of other company/ies in which the person has held any post, Details of equity shareholding in the company, if any) of Chairman/Managing Director/Director/Chief Executive Officer (Details as at Annex-IIIa)Note: With reference to point 9, ownership of the Sub Agent should be detailed up to the last layer of equity holding ending in mentioning the name of the individual/ entity that owns beneficial interest in the company.Date:Place:Signature of Chartered AccountantSignature of Managing DirectorAnnex-IIIa : List of Certified copies of Documents to be submittedCertificate of IncorporationMemorandum (up-to-date) and Articles of AssociationBoard resolution for conducting money transfer activities, submission of application and its contents including authorization of an official to make the application.Details of associates, group companies, etc.PAN Card/s of the Director/s.Bank Account details and sealed confidential reports from banks.A certificate from Chartered Accountant certifying Net Owned FundsBalance Sheet and P&L A/c statement for the last three years.Business plan for the next three years.Conduct certificate from the local police authorities.Declaration regarding past criminal cases, cases initiated/ pending against the company or its Directors by any law enforcing agencies.Photographs of the Directors and key persons.Information about the management.Shop and establishment certificate/ other municipal certificate.Annex-IVStatement showing details of quantum of remittances received through Money Transfer Service Scheme during the quarter ended __________________Name of the Indian Agent ______________________________________Name of the Overseas PrincipalTotal quantum of remittances received in US $INR equivalentNote: This statement is required to be submitted to the Regional Office concerned of the Foreign Exchange Department of the Reserve Bank and Foreign Exchange Department, Forex Markets Division, Central Office, Amar Building, Fort, Mumbai-400001 within 15 days from the close of the quarter to which it relates.Annex-VStatement of Collateral kept by Indian AgentsName of the Indian Agent __________________________Name of the Overseas PrincipalTotal quantum of remittances received during the past 6 months in US $Amount of collateral held in US $Collateral kept in various forms (Foreign Currency Deposit/ Bank Guarantee)Last review of adequacy of collateral along with observationsNote: This statement as at the end of June and December every year is required to be submitted to the Regional Office concerned of the Foreign Exchange Department of the Reserve Bank and Foreign Exchange Department, Forex Markets Division, Central Office, Amar Building, Fort, Mumbai-400001 within 15 days from the close of the half year to

Banking Regulation Governing ExportsExport of Goods and Services from India is governed by clause (a) of sub-section (1) and sub-section (3) of Section 7 of the Foreign Exchange Management Act 1999 (42 of 1999), read with Notification No. G.S.R. 381(E) dated May 3, 2000 viz. Foreign Exchange Management (Current Account Transactions) Rules, 2000, further read with 1FEMA Notification No.23(R)/2015-RB dated January 12, 2016. These Regulations are amended from time to time to incorporate the changes in the regulatory framework and published through amendment notifications.Within the contours of the Regulations, Reserve Bank of India also issues directions to Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), 1999. These directions lay down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/ constituents with a view to implementing the regulations framed.Instructions issued on export of goods and services from India have been compiled in this Master Direction. The list of underlying circulars/ notifications which form the basis of this Master Direction is furnished in the Appendix. Reporting instructions can be found in Master Directions on reporting (Master Direction No. 18 dated January 01, 2016)It may be noted that, whenever necessary, Reserve Bank shall issue directions to Authorised Persons through A.P. (DIR Series) Circulars in regard to any change in the Regulations or the manner in which relative transactions are to be conducted by the Authorised Persons with their customers/ constituents. The Master Direction issued herewith shall be amended suitably simultaneously.1. Realization and repatriation of proceeds of export of goods / software / servicesIt is obligatory on the part of the exporter to realize and repatriate the full value of goods / software / services to India within a stipulated period from the date of export, as under:It has been decided in consultation with the Government of India that the period of realization and repatriation of export proceeds shall be nine months from the date of export for all exporters including Units in Special Economic Zones (SEZs), Status Holder Exporters, Export Oriented Units (EOUs), Units in Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) & Bio-Technology Parks (BTPs) until further notice.For goods exported to a warehouse established outside India, the proceeds shall be realized within fifteen months from the date of shipment of goods.2. Manner of receipt and payment(i) The amount representing the full export value of the goods exported shall be received through an AD Bank in the manner specified in the Foreign Exchange Management (Manner of Receipt & Payment) Regulations, 2016 notified vide Notification No. FEMA.14 (R)/2016-RB dated May 02, 2016.(ii) When payment for goods sold to overseas buyers during their visits is received in this manner, EDF (duplicate) should be released by the AD Category – I banks only on receipt of funds in their Nostro account or if the AD Category – I bank concerned is not the Credit Card servicing bank, on production of a certificate by the exporter from the Credit Card servicing bank in India to the effect that it has received the equivalent amount in foreign exchange, AD Category – I banks may also receive payment for exports made out of India by debit to the credit card of an importer where the reimbursement from the card issuing bank/ organization will be received in foreign exchange.(iii) Processing of export related receipts through Online Payment Gateway Service Providers (OPGSPs)Authorised Dealer Category – I (AD Category – I) banks have been allowed to offer the facility of repatriation of export related remittances by entering into standing arrangements with Online Payment Gateway Service Providers (OPGSPs) subject to the following conditions –The AD Category-I banks offering this facility shall carry out the due diligence of the OPGSP.This facility shall only be available for export of goods and services of value not exceeding USD 10,000 (US Dollar ten thousand).AD Category-I banks providing such facilities shall open a NOSTRO collection account for receipt of the export related payments facilitated through such arrangements. Where the exporters availing of this facility are required to open notional accounts with the OPGSP, it shall be ensured that no funds are allowed to be retained in such accounts and all receipts should be automatically swept and pooled into the NOSTRO collection account opened by the AD Category-I bank.A separate NOSTRO collection account may be maintained for each OPGSP or the bank should be able to delineate the transactions in the NOSTRO account of each OPGSP.Under this arrangement, the permissible debits to the NOSTRO collection account are for repatriation of funds representing export proceeds to India for credit to the exporters’ account, payment of fee/commission to the OPGSP as per the predetermined rates / frequency/ arrangement; and charge back to the importer where the exporter has failed in discharging his obligations under the sale contract.The balances held in the NOSTRO collection account shall be repatriated and credited to the respective exporter's account with a bank in India immediately on receipt of the confirmation from the importer and, in no case, later than seven days from the date of credit to the NOSTRO collection account.AD Category -I banks shall satisfy themselves as to the bona-fides of the transactions and ensure that the purpose codes reported to the Reserve Bank in the online payment gateways are appropriate.AD Category -I banks shall submit all the relevant information relating to any transaction under this arrangement to the Reserve Bank, as and when advised to do so.Each NOSTRO collection account should be subject to reconciliation and audit on a quarterly basis.Resolution of all payment related complaints of exporters in India shall remain the responsibility of the OPGSP concerned.AD Category-I banks desirous of entering into such an arrangement/s should report the details of each such arrangement as and when entered into to the Foreign Exchange Department, Central Office, Reserve Bank of India, Mumbai.4A start-up can realise the receivables of its overseas subsidiary and repatriate them through Online Payment Gateway Service Providers (OPGSPs).(iv) Settlement System under ACU Mechanisma) In order to facilitate transactions / settlements, effective January 01, 2009, participants in the Asian Clearing Union will have the option to settle their transactions either in ACU Dollar or in ACU Euro. Accordingly, the Asian Monetary Unit (AMU) shall be denominated as ‘ACU Dollar’ and ‘ACU Euro’ which shall be equivalent in value to one US Dollar and one Euro, respectively.b) Further, AD Category – I banks are allowed to open and maintain ACU Dollar and ACU Euro accounts with their correspondent banks in other participating countries. All eligible payments are required to be settled by the concerned banks through these accounts.c) Relaxation from ACU Mechanism- Indo-Myanmar Trade - Trade transactions with Myanmar can be settled in any freely convertible currency in addition to the ACU mechanism.d) In view of the difficulties being experienced by importers/exporters in payments to / receipts from Iran, it has been decided that with effect from December 27, 2010, all eligible current account transactions including trade transactions with Iran should be settled in any permitted currency outside the ACU mechanism, until further notice.e) In view of the understanding reached among the members of the ACU during the 44th Meeting of the ACU Board in June, 2015, it has been decided to permit the use of the Nostro accounts of the commercial banks of the ACU member countries, i.e., the ACU Dollar and ACU Euro accounts, for settling the payments of both exports and imports of goods and services among the ACU countries.(v) Third party payments for export / import transactionsTaking into account the evolving international trade practices, it has been decided to permit third party payments for export / import transactions can be made subject to conditions as under:a) Firm irrevocable order backed by a tripartite agreement should be in place. However, it may not be insisted upon in cases where documentary evidence for circumstances leading to third party payments / name of the third party being mentioned in the irrevocable order/ invoice has been produced subject to:AD bank should be satisfied with the bona-fides of the transaction and export documents, such as, invoice / FIRC.AD bank should consider the FATF statements while handling such transaction.b) Third party payment should be routed through the banking channel only;c) The exporter should declare the third party remittance in the Export Declaration Form and it would be responsibility of the Exporter to realize and repatriate the export proceeds from such third party named in the EDF;d) It would be responsibility of the Exporter to realize and repatriate the export proceeds from such third party named in the EDF;e) Reporting of outstanding, if any, in the XOS would continue to be shown against the name of the exporter. However, instead of the name of the overseas buyer from where the proceeds have to be realized, the name of the declared third party should appear in the XOS;f) In case of shipments being made to a country in Group II of Restricted Cover Countries, (e.g. Sudan, Somalia, etc.), payments for the same may be received from an Open Cover Country; andg) In case of imports, the Invoice should contain a narration that the related payment has to be made to the (named) third party, the Bill of Entry should mention the name of the shipper as also the narration that the related payment has to be made to the (named) third party and the importer should comply with the related extant instructions relating to imports including those on advance payment being made for import of goods.(vi) Settlement of Export transactions in currencies not having a direct exchange rateTo further liberalize the procedure and facilitate settlement of export transactions where the invoicing is in a freely convertible currency and the settlement takes place in the currency of the beneficiary, which though convertible, does not have a direct exchange rate, it has been decided that AD Category-I banks may permit settlement of such export transactions (excluding those put through the ACU mechanism), subject to conditions as under:Exporter shall be a customer of the AD BankSigned contract / invoice is in a freely convertible currency,The beneficiary is willing to receive the payment in the currency of beneficiary instead of the original (freely convertible) currency of the invoice/ contract, Letter of Credit as full and final settlement,AD bank is satisfied with the bonafides of the transactions, andThe counterparty to the exporter/ importer of the AD bank is not from a country or jurisdiction in the updated FATF Public Statement on High Risk & Non Co-operative Jurisdictions on which FATF has called for counter measures.3) Exchange Earners’ Foreign Currency Account (EEFC Account)(i) A person resident in India may open with, an AD Category – I bank in India, an account in foreign currency called the Exchange Earners’ Foreign Currency (EEFC) Account, in terms of10Regulation 4 (D) of Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India) Regulations, 2015 dated January 21, 2016.(ii) Resident individuals are permitted to include resident close relative(s) as defined in the Companies Act 2013 as a joint holder(s) in their EEFC bank accounts on former or survivor basis.(iii) This account shall be maintained only in the form of non-interest bearing current account. No credit facilities, either fund-based or non-fund based, shall be permitted against the security of balances held in EEFC accounts by the AD Category – I banks.(iv) All categories of foreign exchange earners are allowed to credit 100% of their foreign exchange earnings to their EEFC Accounts subject to the condition thatThe sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments.The facility of EEFC scheme is intended to enable exchange earners to save on conversion/transaction costs while undertaking forex transactions. This facility is not intended to enable exchange earners to maintain assets in foreign currency, as India is still not fully convertible on Capital Account.(v) The eligible credits represent –Inward remittance received through normal banking channel, other than the remittance received pursuant to any undertaking given to the Reserve Bank or which represents foreign currency loan raised or investment received from outside India or those received for meeting specific obligations by the account holder.Payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in Export Processing Zone, Software Technology Park or Electronic Hardware Technology Park for supply of goods to similar such unit or to a unit in Domestic Tariff Area and also payments received in foreign exchange by a unit in Domestic Tariff Area for supply of goods to a unit in Special Economic Zone (SEZ);(vi) AD Category – I banks may permit their exporter constituents to extend trade related loans/ advances to overseas importers out of their EEFC balances without any ceiling subject to compliance of provisions of Notification No. FEMA 3/2000-RB dated May 3, 2000 as amended from time to time.(vii) AD Category – I banks may permit exporters to repay packing credit advances whether availed in Rupee or in foreign currency from balances in their EEFC account and / or Rupee resources to the extent exports have actually taken place.(viii) Where a part of the export proceeds are credited to an EEFC account, the export declaration (duplicate) form may be certified as: “Proceeds amounting to …… representing ….. percent of the export realization credited to the EEFC account maintained by the exporter with……”4. Exports to neighboring countries by road, rail or riverThe following procedure should be adopted by exporters for filing original copies of EDF where exports are made to neighboring countries by road, rail or river transport:In case of exports by barges/country craft/road transport, the form should be presented by exporter or his agent at the Customs station at the border through which the vessel or vehicle has to pass before crossing over to the foreign territory. For this purpose, exporter may arrange either to give the form to the person in charge of the vessel or vehicle or forward it to his agent at the border for submission to Customs.As regards exports by rail, Customs staff has been posted at certain designated railway stations for attending to Customs formalities. They will collect the EDF for goods loaded at these stations so that the goods may move straight on to the foreign country without further formalities at the border. The list of designated railway stations can be obtained from the Railways. For goods loaded at stations other than the designated stations, exporters must arrange to present EDF to the Customs Officer at the Border Land Customs Station where Customs formalities are completed.5. Border trade with MyanmarIn supersession of instructions contained in A.P. (DIR Series) Circular No. 17 dated October 16, 2000, barter system of trade at the Indo-Myanmar border has been discontinued and replaced with normal trade with effect from December 1, 2015. Accordingly, all trade transactions with Myanmar, including those at the Indo-Myanmar border with effect from December 1, 2015 shall be settled in any permitted currency in addition to the Asian Clearing Union mechanism.6. Project Exports and Service Exports(i) Export of engineering goods on deferred payment terms and execution of turnkey projects and civil construction contracts abroad are collectively referred to as ‘Project Exports’. Indian exporters are required to obtain the approval of the AD Category – I banks/ Exim Bank at post-award stage before undertaking execution of such contracts. Regulations relating to ‘Project Exports’ and ‘Service Exports’ are laid down in the revised Memorandum of Instructions on Project and Service Exports (PEM-July 2014).(ii) Accordingly, AD banks / Exim Bank may consider awarding post-award approvals without any monetary limit and permit subsequent changes in the terms of post award approval within the relevant FEMA guidelines / regulations. Project and service exporters may approach AD banks / Exim Bank based on their commercial judgment. The respective AD bank / Exim Bank should monitor the projects for which post-award approval has been granted by them.(iii) In order to provide greater flexibility to project & service exporters in conducting their overseas transactions, facilities have been provided as under:Inter-Project transfer of machinery - The stipulation regarding recovery of market value (not less than book value) of the machinery, etc., from the transferee project has been withdrawn. Further, exporters may use the machinery / equipment for performing any other contract secured by them in any country subject to the satisfaction of the sponsoring AD Category – I bank(s) / Exim Bank and also subject to the reporting requirement and would be monitored by the AD Category – I bank(s) / Exim Bank.Inter-Project transfer of funds - AD Category – I bank(s) / Exim Bank may permit exporters to open, maintain and operate one or more foreign currency account/s in a currency/currencies of their choice with inter-project transferability of funds in any currency or country. The Inter-project transfer of funds will be monitored by the AD Category – I bank(s) / Exim Bank.Deployment of temporary cash surpluses - Subject to monitoring by the AD Category – I bank(s) / Exim Bank, Project / Service exporters may deploy their temporary cash surpluses, generated outside India investments in short-term paper abroad including treasury bills and other monetary instruments with a maturity or remaining maturity of one year or less and the rating of which should be at least A-1/AAA by Standard & Poor or P-1/-AAA by Moody’s or F1/AAA by Fitch IBCA etc., and as deposits with branches / subsidiaries outside India of AD Category – I banks in India.Repatriation of funds in case of On-site Software Contracts - The requirement of repatriation of 30 per cent of contract value in respect of on-site contracts by software exporter company / firm has been dispensed with. They should, however, repatriate the profits of on-site contracts after completion of the contracts.7. Export of goods through Customs ports(i) Customs shall certify the value declared and give running serial number on the two copies of Export Declaration Form (EDF), submitted by exporter at Non- Electronic Data Interchange (EDI) port.(ii) Customs shall retain the original EDF for transmission to the Reserve Bank and return the duplicate copy to the exporter.(iii) At the time of shipment of goods, exporters shall submit the duplicate copy of the EDF to Customs. After examining the goods, Customs shall certify the quantity in the form and return it to the exporter for submission to AD for negotiation or collection of export bills.(iv) Within 21 days from the date of export, exporter shall lodge the duplicate copy together with relative shipping documents and an extra copy of the invoice to the AD named in the EDF.(v) After the documents have been negotiated / sent for collection, the AD shall report the transaction through Export Data Processing and Monitoring System (EDPMS) to the Reserve Bank and retain the documents at their end.(vi) In case of exports made under deferred credit arrangement or to joint ventures abroad against equity participation or under rupee credit agreement, the number and date of the Reserve Bank approval and/or number and date of the relative RBI circular shall be recorded at the appropriate place on the EDF.(vii) Where duplicate copy of EDF is misplaced or lost, AD may accept copy of duplicate EDF duly certified by Customs.8. Export of goods/ software done through EDI ports(i) The shipping bill shall be submitted in duplicate to the authority concerned (Commissioner of Customs or the SEZ, if the export is made through it).(ii) After verifying and authenticating, the authority concerned shall hand over to the exporter, one copy of the shipping bill marked ‘Exchange Control (EC) Copy’ for being submitted to the AD bank within 21 days from the date of export for collection/negotiation of shipping documents. However, in cases where EC copy of shipping bill is not printed in terms of CBEC’s Circular No. 55/2016-Customs dated November 23, 2016 and data of shipping bill is integrated with EDPMS, requirement of submission of EC copy of shipping bill with the AD bank would not be there.(iii) The manner of disposal of EC copy of Shipping Bill shall be the same as that for EDF. The duplicate copy of the form together with a copy of invoice etc. shall be retained by ADs and may not be submitted to the Reserve Bank. The question of disposal of EC copy of shipping bill will, however, not arise where EC copy of shipping bill is not printed in terms of CBEC’s Circular No.55/2016-Customs dated November 23, 2016 and data of shipping bill is integrated with EDPMS.Note: - In cases where ECGC/private insurance companies regulated by Insurance Regulatory and Development Authority (IRDA) initially settles the claims of exporters and the export proceeds are subsequently received from the buyer/buyer’s country, the share of exporters in the amount so received is disbursed through the AD which had handled the shipping documents post receipt of certificate issued by ECGC/ private insurance companies. The certificate will indicate the number of declaration form, name of the exporter, name of the AD, date of negotiation, bill number, invoice value and the amount actually received by ECGC/private insurance company.9. Export of goods through PostPostal Authorities shall allow export of goods by post only if the original copy of the EDF has been countersigned by an AD. Therefore, EDF which involve sending goods by post should be first presented by the exporter to an AD for countersignature. The procedure is as under:(i) AD shall countersign EDF after ensuring that the parcel has been addressed to their branch or correspondent bank in the country of import and return the original copy to the exporter, who shall then submit the EDF to the post office with the parcel.(ii) The duplicate copy of EDF shall be retained by the AD to whom the exporter shall submit relevant documents together with an extra copy of invoice for negotiation/collection, within the prescribed period of 21 days.(iii) The concerned overseas branch or correspondent shall be instructed to deliver the parcel to consignee against payment or acceptance of relative bill.(iv) AD may, however, countersign EDF covering parcels addressed direct to the consignees, provided:An irrevocable letter of credit for the full value of export has been opened in favor of the exporter and has been advised through the AD concerned OrThe full value of the shipment has been received in advance by the exporter through an AD. OrThe AD is satisfied, on the basis of the standing and track record of the exporter and the arrangements made for realization of the export proceeds.In such cases, particulars of advance payment/letter of credit / AD’s certification of standing, etc., of the exporter should be furnished on the form under proper authentication.(v) Any alteration in the name and address of consignee on the EDF form should also be authenticated by AD under its stamp and signature.10. Third party export proceedsRealization of export proceeds in respect of export of goods / software from third party should be duly declared by the exporter in the appropriate declaration form11. Grant of EDF waiverAD Category – I banks may consider requests for grant of EDF waiver from exporters as under:Status holders shall be entitled to export freely exportable items (excluding Gems and Jewellery, Articles of Gold and precious metals) on free of cost basis for export promotion subject to an annual limit of Rupees One Crore or 2% of average annual export realisation during preceding three licensing years, whichever is lower. For export of pharma products by pharmaceutical companies, the annual limit would be 2% of average annual export realisation during preceding three licensing years. In case of supplies of pharmaceutical products, vaccines and lifesaving drugs to health programmes of international agencies such as UN,WHO-PAHO and Government health programmes, the annual limit shall be upto 8% of the average annual export realisation during preceding three licensing years. Such free of cost supplies shall not be entitled to Duty Drawback or any other export incentive under any export promotion scheme.Exports of goods not involving any foreign exchange transaction directly or indirectly requires the waiver of EDF procedure from the Reserve Bank.12. Receipt of advance against exports(1) In terms of Regulation 15 of Notification No. FEMA 23 (R)/2015-RB dated January 12, 2016, where an exporter receives advance payment (with or without interest), from a buyer outside India, the exporter shall be under an obligation to ensure that the shipment of goods is made within one year from the date of receipt of advance payment; the rate of interest, if any, payable on the advance payment does not exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points; and the documents covering the shipment are routed through the AD Category – I bank through whom the advance payment is received.Provided that in the event of the exporter’s inability to make the shipment, partly or fully, within one year from the date of receipt of advance payment, no remittance towards refund of unutilized portion of advance payment or towards payment of interest, shall be made after the expiry of the said period of one year, without the prior approval of the Reserve Bank.EDPMS will capture the details of advance remittances received for exports in EDPMS. Henceforth, AD Category – I banks will have to report all the inward remittances including advance as well as old outstanding inward remittances received for export of goods/ software to EDPMS. Further, AD Category – I banks need to report the electronic FIRC to EDPMS wherever such FIRCs are issued against inward remittances.The quarterly return being submitted for delay in utilization of advances received for export stands discontinued.(2) AD Category- I banks can also allow exporters having a minimum of three years’ satisfactory track record to receive long term export advance up to a maximum tenor of 10 years to be utilized for execution of long term supply contracts for export of goods subject to the conditions as under:(i) Firm irrevocable supply orders and contracts should be in place. The contract with the overseas party/ buyer should be vetted and the same shall clearly specify the nature, amount and delivery timelines of the products over the years and penalty in case of non-performance or contract cancellation. Product pricing should be in consonance with prevailing international prices.(ii) Company should have capacity, systems and processes in place to ensure that the orders over the duration of the said tenure can actually be executed.(iii) The facility is to be provided only to those entities, which have not come under the adverse notice of Enforcement Directorate or any such regulatory agency or have not been caution listed.(iv) Such advances should be adjusted through future exports.(v) The rate of interest payable, if any, should not exceed LlBOR plus 200 basis points.(vi) The documents should be routed through one Authorized Dealer bank only.(vii) Authorised Dealer bank should ensure compliance with AML / KYC guidelines(viii) Such export advances shall not be permitted to be used to liquidate Rupee loans classified as NPA.(ix) Double financing for working capital for execution of export orders should be avoided.(x) Receipt of such advance of USD 100 million or more should be immediately reported to the Trade Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai.(xi) In case Authorized Dealer banks are required to issue bank guarantee (BG) / Stand by Letter of Credit (SBLC) for export performance, then the issuance should be rigorously evaluated as any other credit proposal keeping in view, among others, prudential requirements based on board approved policy.BG / SBLC may be issued for a term not exceeding two years at a time and further rollover of not more than two years at a time may be allowed subject to satisfaction with relative export performance as per the contract.BG / SBLC should cover only the advance on reducing balance basis.BG / SBLC issued from India in favor of overseas buyer should not be discounted by the overseas branch / subsidiary of bank in India.Note: AD Category – I banks may also be guided by the Master Circular on Guarantees and Co-acceptances issued by Department of Banking Regulation.(xii) AD Category – I banks may allow the purchase of foreign exchange from the market for refunding advance payment credited to EEFC account only after utilizing the entire balances held in the exporter’s EEFC accounts maintained at different branches/banks.(3) AD Category- I banks may allow exporters to receive advance payment for export of goods which would take more than one year to manufacture and ship and where the ‘export agreement’ provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment subject to the following conditions:-(i) The KYC and due diligence exercise has been done by the AD Category – I bank for the overseas buyer;(ii) Compliance with the Anti-Money Laundering standards has been ensured;(iii) The AD Category-I bank should ensure that export advance received by the exporter should be utilized to execute export and not for any other purpose i.e., the transaction isa bonafide transaction;(iv) Progress payment, if any, should be received directly from the overseas buyer strictly in terms of the contract;(v) The rate of interest, if any, payable on the advance payment shall not exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points;(vi) There should be no instance of refund exceeding 10% of the advance payment received in the last three years;(vii) The documents covering the shipment should be routed through the same authorised dealer bank; and(viii) In the event of the exporter's inability to make the shipment, partly or fully, no remittance towards refund of unutilized portion of advance payment or towards payment of interest should be made without the prior approval of the Reserve Bank.(4) (i) As it has been observed that there is substantial increase in the number and amount of advances received for exports remaining outstanding beyond the stipulated period on account of non-performance of such exports (shipments in case of export of goods), AD Category –I banks are advised to efficiently follow up with the concerned exporters in order to ensure that export performance (shipments in case of export of goods) are completed within the stipulated time period.(ii) It is further reiterated that AD category –I banks should exercise proper due diligence and ensure compliance with KYC and AML guidelines so that only bonafide export advances flow into India. Doubtful cases as also instances of chronic defaulters may be referred to Directorate of Enforcement (DoE) for further investigation. A quarterly statement indicating details of such cases may be forwarded to the concerned Regional Offices of RBI within 21 days from the end of each quarter.13. EDF Approval for Trade Fair/Exhibitions abroadFirms / Companies and other organizations participating in Trade Fair/Exhibition abroad can take/export goods for exhibition and sale outside India without the prior approval of the Reserve Bank. Unsold exhibit items may be sold outside the exhibition/trade fair in the same country or in a third country. Such sales at discounted value are also permissible. It would also be permissible to 'gift’ unsold goods up to the value of USD 5000 per exporter, per exhibition/trade fair. AD Category – I banks may approve EDF of export items for display or display-cum-sale in trade fairs/exhibitions outside India subject to the following:(i) The exporter shall produce relative Bill of Entry within one month of re-import into India of the unsold items.(ii) The exporter shall report to the AD Category – I banks the method of disposal of all items exported, as well as the repatriation of proceeds to India.(iii) Such transactions approved by the AD Category – I banks will be subject to 100 per cent audit by their internal inspectors/auditors.14. Delay in submission of shipping documents by exportersIn cases where exporters’ present documents pertaining to exports after the prescribed period of 21 days from date of export, AD Category – I banks may handle them without prior approval of the Reserve Bank, provided they are satisfied with the reasons for the delay.15. Direct dispatch of documents by the exporter(i) AD Category – I banks should normally dispatch shipping documents to their overseas branches/correspondents expeditiously. However, they may dispatch shipping documents direct to the consignees or their agents resident in the country of final destination of goods in cases where:Advance payment or an irrevocable letter of credit has been received for the full value of the export shipment and the underlying sale contract/letter of credit provides for dispatch of documents direct to the consignee or his agent resident in the country of final destination of goods.The AD Category – I banks may also accede to the request of the exporter provided the exporter is a regular customer and the AD Category – I bank is satisfied, on the basis of standing and track record of the exporter and arrangements have been made for realization of export proceeds.(ii) AD Category – I banks may also permit 'Status Holder Exporters’ (as defined in the Foreign Trade Policy), and units in Special Economic Zones (SEZ) to dispatch the export documents to the consignees outside India subject to the terms and conditions that:The export proceeds are repatriated through the AD banks named in the EDF.The duplicate copy of the EDF is submitted to the AD banks for monitoring purposes, by the exporters within 21 days from the date of shipment of export.(iii) AD Category – I banks may regularize cases of dispatch of shipping documents by the exporter direct to the consignee or his agent resident in the country of the final destination of goods, up to USD 1 million or its equivalent, per export shipment, subject to the following conditions:The export proceeds have been realized in full.The exporter is a regular customer of AD Category – I bank for a period of at least six months.The exporter’s account with the AD Category – I bank is fully compliant with the Reserve Bank’s extant KYC / AML guidelines.The AD Category – I bank is satisfied about the bonafides of the transaction.In case of doubt, the AD Category – I bank may consider filing Suspicious Transaction Report (STR) with FIU_IND (Financial Intelligence Unit in India).16. Change of buyer/consigneePrior approval of the Reserve Bank is not required if, after goods have been shipped, they are to be transferred to a buyer other than the original buyer in the event of default by the latter, provided the reduction in value, if any, involved does not exceed 25 per cent of the invoice value and the realization of export proceeds is not delayed beyond the period of 9 months from the date of export. Where the reduction in value exceeds 25%, all other relevant conditions stipulated in paragraph C.17 should also be satisfied.17. Export of goods by Special Economic Zones (SEZs)(i) Units in SEZs are permitted to undertake job work abroad and export goods from that country itself subject to the conditions that:Processing / manufacturing charges are suitably loaded in the export price and are borne by the ultimate buyer.The exporter has made satisfactory arrangements for realization of full export proceeds subject to the usual EDF procedure.(ii) AD Category – I banks may permit units in DTAs to purchase foreign exchange for making payment for goods supplied to them by units in SEZs. Authorised Dealer Banks are permitted to sell foreign exchange to a unit in the DTA for making payment in foreign exchange to a unit in the SEZ for the services rendered by it (i.e. a unit in SEZ) to a DTA unit. It must be ensured that in the Letter of Approval (LoA) issued to the SEZ unit by the Development Commissioner(DC) of the SEZ, the provisions pertaining to the goods / services supplied by the SEZ unit to the DTA unit and for payment in foreign exchange for the same should be mentioned.18. Extension of time(i) The Reserve Bank of India has permitted the AD Category – I banks to extend the period of realization of export proceeds beyond stipulated period of realization from the date of export, up to a period of six months, at a time, irrespective of the invoice value of the export subject to the following conditions:The export transactions covered by the invoices are not under investigation by Directorate of Enforcement / Central Bureau of Investigation or other investigating agencies,The AD Category – I bank is satisfied that the exporter has not been able to realize export proceeds for reasons beyond his control,The exporter submits a declaration that the export proceeds will be realized during the extended period,While considering extension beyond one year from the date of export, the total outstanding of the exporter does not exceed USD one million or 10 per cent of the average export realizations during the preceding three financial years, whichever is higher.In cases where the exporter has filed suits abroad against the buyer, extension may be granted irrespective of the amount involved / outstanding.(ii) Cases which are not covered by the above instructions would require prior approval from the concerned Regional Office of the Reserve Bank.(iii) Reporting should be done in EDPMS.19. Write-off of unrealized export bills(i) An exporter who has not been able to realize the outstanding export dues despite best efforts, may either self-write off or approach the AD Category – I banks, who had handled the relevant shipping documents, with appropriate supporting documentary evidence. The limits prescribed for write-offs of unrealized export bills are as under:Self “write-off” by an exporter(Other than Status Holder Exporter)5%*Self “write-off” by Status Holder Exporters10%*‘Write-off” by Authorized Dealer Bank-10%**of the total export proceeds realized during the previous calendar year.(ii) The above limits will be related to total export proceeds realized during the previous calendar year and will be cumulatively available in a year.(iii) The above write-off will be subject to conditions that the relevant amount has remained outstanding for more than one year, satisfactory documentary evidence is furnished in support of the exporter having made all efforts to realize the dues, and the case falls under any of the undernoted categories:The overseas buyer has been declared insolvent and a certificate from the official liquidator indicating that there is no possibility of recovery of export proceeds has been produced.The overseas buyer is not traceable over a reasonably long period of time.The goods exported have been auctioned or destroyed by the Port / Customs / Health authorities in the importing country.The unrealized amount represents the balance due in a case settled through the intervention of the Indian Embassy, Foreign Chamber of Commerce or similar Organization;The unrealized amount represents the undrawn balance of an export bill (not exceeding 10% of the invoice value) remaining outstanding and turned out to be unrealizable despite all efforts made by the exporter;The cost of resorting to legal action would be disproportionate to the unrealized amount of the export bill or where the exporter even after winning the Court case against the overseas buyer could not execute the Court decree due to reasons beyond his control;Bills were drawn for the difference between the letter of credit value and actual export value or between the provisional and the actual freight charges but the amounts have remained unrealized consequent on dishonor of the bills by the overseas buyer and there are no prospects of realization.(iv) The exporter has surrendered proportionate export incentives if any, availed of in respect of the relative shipments. The AD Category – I banks should obtain documents evidencing surrender of export incentives availed of before permitting the relevant bills to be written off.(v) In case of self-write-off, the exporter should submit to the concerned AD bank, a Chartered Accountant’s certificate, indicating the export realization in the preceding calendar year and also the amount of write-off already availed of during the year, if any, the relevant EDF to be written off, Bill No., invoice value, commodity exported, country of export. The CA certificate may also indicate that the export benefits, if any, availed of by the exporter have been surrendered.(vi) However, the following would not qualify for the write off facility:Exports made to countries with externalization problem i.e. where the overseas buyer has deposited the value of export in local currency but the amount has not been allowed to be repatriated by the central banking authorities of the country.EDF which are under investigation by agencies like, Enforcement Directorate, Directorate of Revenue Intelligence, Central Bureau of Investigation, etc. as also the outstanding bills which are subject matter of civil / criminal suit.vii) AD banks should report write off of export bills through EDPMS to the Reserve Bank.viii) AD banks are advised to put in place a system under which their internal inspectors or auditors (including external auditors appointed by authorised dealers) should carry out random sample check / percentage check of write-off outstanding export bills.ix) Cases not covered by the above instructions / beyond the above limits, may be referred to the concerned Regional Office of Reserve Bank of India.20. Export claims(i) AD Category – I banks may remit export claims on application, provided the relative export proceeds have already been realized and repatriated to India and the exporter is not on the caution list of the Reserve Bank.(ii) In all such cases of remittances, the exporter should be advised to surrender proportionate export incentives, if any, received by him21. Write off in cases of payment of claims by ECGC and private insurance companies regulated by Insurance Regulatory and Development Authority (IRDA(i) AD Category – I banks shall, on an application received from the exporter supported by documentary evidence from the ECGC and private insurance companies regulated by IRDA confirming that the claim in respect of the outstanding bills has been settled by them, write off the relative export bills17in EDPMS.(ii) Such write-off will not be restricted to the limit of 10 per cent indicated above.(iii) Surrender of incentives, if any, in such cases will be as provided in the Foreign Trade Policy.(iv) The claims settled in rupees by ECGC and private insurance companies regulated by IRDA should not be construed as export realization in foreign exchange.22. Write-off – relaxationAs announced in the Foreign Trade Policy (FTP), 2015-20, realization of export proceeds shall not be insisted upon under any of the Export Promotion Schemes under the said FTP, subject to the following conditions:The write off on the basis of merits is allowed by the Reserve Bank or by AD Category – I bank on behalf of the Reserve Bank, as per extant guidelines;The exporter produces a certificate from the Foreign Mission of India concerned, about the fact of non-recovery of export proceeds from the buyer; andThis would not be applicable in self write off cases.23. Exporters’ Caution List1) Caution Listing/ de-caution Listing of exporters is automated in EDPMS. The updated list of caution listed exporters can be accessed through EDPMS on a daily basis. Criteria laid down for cautioning/ de-cautioning of exporters in EDPMS are as under:The exporters would be caution listed if any shipping bill against them remains open for more than two years in EDPMS provided no extension is granted by AD Category –I bank / RBI. Date of shipment will be considered for reckoning the realisation period.Once related bills are realised and closed or extension for realisation is granted, the exporter will automatically be de-caution listed.The exporters can also be caution listed even before the expiry of two years period based on the recommendation of AD banks. The recommendation may be based on cases where exporter has come to adverse notice of the Enforcement Directorate (ED)/ Central Bureau of Investigation (CBI)/ Directorate of Revenue Intelligence (DRI)/ any such other law enforcement agency or the case where exporter is not traceable or not making any serious efforts for realisation of export proceeds. In such cases, AD may forward its findings to the concerned regional office of RBI recommending inclusion of the name of the exporter in the caution list.Reserve Bank will caution / de-caution the exporters in such cases based on the recommendation of AD Category – I banks.2) AD Category – I banks should follow the procedure mentioned below while handling shipping documents in respect of caution listed exporters:(a) They will intimate the exporters about their caution listing, giving the details of outstanding shipping bills. When caution listed exporters submit shipping documents for negotiation / purchase/ discount/ collection, etc. the AD Category – I bank may accept the documents subject to following conditions:-The exporters concerned should produce evidence of having received advance payment or an irrevocable letter of credit in their favour covering the full value of the proposed exports;In case of usance bills, the relative letter of credit should cover full export value and also permit such drawings. Besides, the usance bills should also mature within prescribed realisation period reckoned from date of shipment.Except under the above mentioned conditions given in 2 (a) (i) and (ii), AD banks should not handle the shipping documents of caution listed exporters.(b) AD Category – I banks should obtain prior approval of the Reserve Bank for issuing guarantees for caution-listed exporters.24. Issue of Guarantees by an Authorised Dealer(i) AD Category – I banks may allow payment of commission, either by remittance or by deduction from invoice value, on application submitted by the exporter. The remittance on agency commission may be allowed subject to conditions as under:Amount of commission has been declared on EDF/SOFTEX form and accepted by the Customs authorities or Ministry of Information Technology, Government of India / EPZ authorities as the case may be. In cases where the commission has not been declared on EDF/SOFTEX form, remittance may be allowed after satisfying the reasons adduced by the exporter for not declaring commission on Export Declaration Form, provided a valid agreement/written understanding between the exporters and/or beneficiary for payment of commission exists.The relative shipment has already been made.(ii) AD Category – I banks may allow payment of commission by Indian exporters, in respect of their exports covered under counter trade arrangement through Escrow Accounts designated in US Dollar, subject to the following conditions:The payment of commission satisfies the conditions as at (a) and (b) stipulated in paragraph (i) above.The commission is not payable to Escrow Account holders themselves.The commission should not be allowed by deduction from the invoice value.(iii) Payment of commission is prohibited on exports made by Indian Partners towards equity participation in an overseas joint venture / wholly owned subsidiary as also exports under Rupee Credit Route except commission up to 10 per cent of invoice value of exports of tea & tobacco.