RESERVE BANK OF INDIA

Foreign Exchange Department

Central Office
Mumbai - 400 001

RBI/2013-14/13
Master Circular No.13/2013-14
(Updated upto June 18, 2014)
July 01, 2013

To,

All Category – I Authorised Dealer Banks

Madam / Sir,

Master Circular on Import of Goods and Services

Import of Goods and Services into India is being allowed in terms of Section 5 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) Rules, 2000 as amended from time to time.

2. This Master Circular consolidates the existing instructions on the subject of "Import of
Goods and Services" at one place. The list of underlying circulars consolidated in this
Master Circular is furnished in Appendix

3. This Master Circular may be referred to for general guidance. The Authorised Dealer
Category – I banks and Authorised Banks may refer to respective circulars /
notifications for detailed information, if so needed.

4. This Master Circular is being issued with a sunset clause of one year. This circular
will stand withdrawn on July 1, 2014 and be replaced by an updated Master Circular on
the subject.

Yours faithfully,

(C.D.Srinivasan)
Chief General Manager
 INDEX

Section I - Introduction
Section II - General Guidelines for imports
B.1. General Guidelines
B.2. Form A-1
B.3. Import Licenses
B.4. Obligation of Purchaser of Foreign Exchange
B.5. Time Limit for Settlement of Import Payments
B.6. Import of Foreign Exchange / Indian Rupees
B.7. Third Party Payment for Import Transactions

Section III - Operational Guidelines for Imports

C.1. Advance Remittance
C.2. Interest on Import Bills
C.3. Remittances against Replacement Imports
C.4. Guarantee for Replacement Import
C.5. Import of Equipment by Business Process Outsourcing (BPO)
Companies for their Overseas Sites
C.6. Receipt of Import Bills/Documents by the Importer Directly from
Overseas Suppliers
C.7. Evidence of Import
C.8. Issue of Acknowledgement
C.9. Verification and Preservation
C.10. Follow-up for Import Evidence
C.11. Issue of Bank Guarantee
C.12. Import of Gold
C.13. Import of Other Precious Metals
C.14. Import Factoring
C.15. Merchanting Trade
Annex -1
Annex- 2
Annex - 3
Appendix
Consolidated List of Circulars in the Master Circular
 Section I - Introduction

(i) Import trade is regulated by the Directorate General of Foreign Trade (DGFT)
under the Ministry of Commerce & Industry, Department of Commerce, Government
of India. Authorised Dealer Category – I (AD Category – I) banks should ensure that
the imports into India are in conformity with the Foreign Trade Policy in force and
Foreign Exchange Management (Current Account Transactions) Rules, 2000 framed
by the Government of India vide Notification No. G.S.R.381 (E) dated May 3, 2000
and the Directions issued by Reserve Bank under Foreign Exchange Management
Act, 1999 from time to time.

(ii) AD Category – I banks should follow normal banking procedures and adhere to
the provisions of Uniform Customs and Practices for Documentary Credits (UCPDC),
etc. while opening letters of credit for import into India on behalf of their constituents.

(iii) Compliance with the provisions of Research & Development Cess Act, 1986
may be ensured for import of drawings and designs.

(iv) AD Category – I banks may also advise importers to ensure compliance with the
provisions of Income Tax Act, wherever applicable.

(v) Any reference to the Reserve Bank should first be made to the Regional Office of
the Foreign Exchange Department situated in the jurisdiction where the applicant
person resides, or the firm / company functions, unless otherwise indicated. If, for
any particular reason, they desire to deal with a different office of the Foreign
Exchange Department, they may approach the Regional Office of its jurisdiction for
necessary approval.

Section II - General Guidelines for Imports

B.1. General Guidelines

Rules and regulations to be followed by the AD Category – I banks from the foreign
exchange angle while undertaking import payment transactions on behalf of their
clients are set out in the following paragraphs. Where specific regulations do not
exist, AD Category – I banks may be governed by normal trade practices. AD
Category – I banks may particularly note to adhere to "Know Your Customer" (KYC)
guidelines issued by Reserve Bank (Department of Banking Operations &
Development) in all their dealings.

B.2. Form A-1

i) Applications by persons, firms and companies for making payments, exceeding

USD 5000 or its equivalent, towards imports into India must be made in Form A-1

ii) It is clarified that the ADs need not obtain any document, including Form A-1,
except a simple letter from the applicant containing the basic information viz., the
name and the address of the applicant, name and address of the beneficiary,
amount to be remitted and the purpose of remittance, as long as the exchange being
purchased is for a current account transaction (and is not included in the Schedules I
and II of the Foreign Exchange Management (Current Account Transactions) Rules,
2000 framed by Government of India vide Notification No. G.S.R.381 (E) dated May
3, 2000, as amended from time to time, the amount does not exceed USD 5,000 or
its equivalent and the payment is made by a cheque drawn on the applicant's bank
account or by a Demand Draft.

B.3. Import Licences

Except for goods included in the negative list which require licence under the Foreign
Trade Policy in force, AD Category - I banks may freely open letters of credit and
allow remittances for import. While opening letters of credit, the ‘For Exchange
Control purposes’ copy of the licence should be called for and special conditions, if
any, attached to such licences should be adhered to. After effecting remittances
under the licence, AD Category - I banks may preserve the copies of utilised licence
/s till they are verified by the internal auditors or inspectors.

B.4. Obligation of Purchaser of Foreign Exchange

(i) In terms of Section 10(6) of the Foreign Exchange Management Act, 1999
(FEMA), any person acquiring foreign exchange is permitted to use it either for the
purpose mentioned in the declaration made by him to an Authorised Dealer Category
– I bank under Section 10(5) of the Act or to use it for any other purpose for which
acquisition of foreign exchange is permissible under the said Act or Rules or
Regulations framed there under.

(ii) Where foreign exchange acquired has been utilised for import of goods into India,
the AD Category – I bank should ensure that the importer furnishes evidence of
import viz., Exchange Control Copy of the Bill of Entry, Postal Appraisal Form or
Customs Assessment Certificate, etc., and satisfy himself that goods equivalent to
the value of remittance have been imported.

(iii) In addition to the permitted methods of payment for imports laid down in
Notification No.FEMA14/2000-RB dated 3rd May 2000, payment for import can also
be made by way of credit to non-resident account of the overseas exporter
maintained with a bank in India. In such cases also AD Category – I banks should
ensure compliance with the instructions contained in sub-paragraphs (i) and (ii)
above.

B.5. Time Limit for Settlement of Import Payments

B.5.1. Time limit for Normal Imports

(i) In terms of the extant regulations, remittances against imports should be

completed not later than six months from the date of shipment, except in cases
where amounts are withheld towards guarantee of performance, etc.
(ii) AD Category – I banks may permit settlement of import dues delayed due to
disputes, financial difficulties, etc. Interest in respect of delayed payments, usance
bills or overdue interest for a period of less than three years from the date of
shipment may be permitted in terms of the directions in para C.2 of Section III below.

B.5.2. Time Limit for Deferred Payment Arrangements

Deferred payment arrangements, including suppliers and buyers credit, providing for
payments beyond a period of six months from date of shipment up to a period of less
than three years, are treated as trade credits for which the procedural guidelines laid
down in the Master Circular for External Commercial Borrowings and Trade Credits
may be followed.

B.5.3. Time Limit for Import of Books

Remittances against import of books may be allowed without restriction as to the

time limit, provided, interest payment, if any, is as per the instructions in para C.2 of
Section III of this Circular.

B.6. Import of Foreign Exchange / Indian Rupees

(i) Except as otherwise provided in the Regulations, no person shall, without the
general or special permission of the Reserve Bank, import or bring into India, any
foreign currency. Import of foreign currency, including cheques, is governed by
clause (g) of sub-section (3) of Section 6 of the Foreign Exchange Management Act,
1999, and the Foreign Exchange Management (Export and Import of Currency)
Regulations 2000, made by Reserve Bank vide Notification No. FEMA 6/2000-RB
dated May 3, 2000, as amended from time to time.

(ii) Reserve Bank may allow a person to bring into India currency notes of
Government of India and / or of Reserve Bank subject to such terms and conditions
as the Reserve Bank may stipulate.

B.6.1. Import of Foreign Exchange into India

A person may –
(i) Send into India, without limit, foreign exchange in any form other than currency
notes, bank notes and travellers cheques;

(ii) Bring into India from any place outside India, without limit, foreign exchange
(other than unissued notes), which shall be subject to the condition that such person
makes, on arrival in India, a declaration to the Custom Authorities at the Airport in
the Currency Declaration Form (CDF) annexed to these Regulations; provided
further that it shall not be necessary to make such declaration where the aggregate
value of the foreign exchange in the form of currency notes, bank notes or travellers
cheques brought in by such person at any one time does not exceed USD 10,000
(US Dollars ten thousand) or its equivalent and/or the aggregate value of foreign
currency notes (cash portion) alone brought in by such person at any one time does
not exceed USD 5,000 (US Dollars five thousand) or its equivalent.
B.6.2. Import of Indian Currency and Currency Notes

(i) Any person resident in India who had gone out of India on a temporary visit, may
bring into India at the time of his return from any place outside India (other than from
Nepal and Bhutan), currency notes of Government of India and Reserve Bank notes
up to an amount not exceeding Rs.10,000/- per person.

(ii) A person may bring into India from Nepal or Bhutan, currency notes of
Government of India and Reserve Bank notes other than notes of denominations of
above Rs.100 in either case.

B.7. Third Party Payment for Import Transactions

AD banks are allowed to make payments to a third party for import of goods, subject
to conditions as under:

a. Firm irrevocable purchase order / tripartite agreement should be in place.

However this requirement may not be insisted upon in case 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.
b. AD bank should be satisfied with the bonafides of the transactions and should
consider the Financial Action Task Force (FATF) statement before handling
the transactions;
c. The Invoice should contain a narration that the related payment has to be
made to the (named) third party;
d. 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;
e. Importer should comply with the related extant instructions relating to imports
including those on advance payment being made for import of goods.

Section III - Operational Guidelines for Imports

C.1. Advance Remittance

C.1.1. Advance Remittance for Import of Goods

(i) AD Category – I bank may allow advance remittance for import of goods without
any ceiling subject to the following conditions:

(a) If the amount of advance remittance exceeds USD 200,000 or its equivalent, an
unconditional, irrevocable standby Letter of Credit or a guarantee from an
international bank of repute situated outside India or a guarantee of an AD Category
– I bank in India, if such a guarantee is issued against the counter-guarantee of an
international bank of repute situated outside India, is obtained.

(b) In cases where the importer (other than a Public Sector Company or a
Department/Undertaking of the Government of India/State Government/s) is unable
to obtain bank guarantee from overseas suppliers and the AD Category – I bank is
satisfied about the track record and bonafides of the importer, the requirement of the
bank guarantee / standby Letter of Credit may not be insisted upon for advance
remittances up to USD 5,000,000 (US Dollar five million). AD Category – I banks
may frame their own internal guidelines to deal with such cases as per a suitable
policy framed by the bank's Board of Directors.

(c) A Public Sector Company or a Department/Undertaking of the Government of

India / State Government/s which is not in a position to obtain a guarantee from an
international bank of repute against an advance payment, is required to obtain a
specific waiver for the bank guarantee from the Ministry of Finance, Government of
India before making advance remittance exceeding USD 100,000.

(ii) All payments towards advance remittance for imports shall be subject to the
specified conditions.

C.1.2. Advance Remittance for Import of Rough Diamonds

AD category – I banks are permitted to take decision on overseas mining companies

to whom an importer (other than PSC or Department / Undertaking of Government of
India / State Government) can make advance payments, without any limit / bank
guarantee/ stand-by letter of Credit. Banks must ensure the following:

i. The overseas mining company should have the recommendation of GJEPC.

ii. The importer should be a recognised processor of rough diamonds and should
have a good track record.
iii. AD Category - I banks should, undertake the transaction based on their
commercial judgment and after being satisfied about the bonafides of the
transaction.
iv. Advance payments should be made strictly as per the terms of the sale
contract and should be made directly to the account of the company
concerned, that is, to the ultimate beneficiary and not through numbered
accounts or otherwise.
v. Further, due caution may be exercised to ensure that remittance is not
permitted for import of conflict diamonds (Kimberly Certification).
vi. KYC and due diligence exercise should be done by the AD Category - I banks
as per the existing guidelines.
vii. AD Category - I banks should follow-up submission of the Bill of Entry /
documents evidencing import of rough diamonds into the country by the
importer, in terms of the Act / Rules / Regulations / Directions issued in this
regard.
viii. In case of an importer entity in the Public Sector or a Department /
Undertaking of the Government of India / State Government/s, AD Category -
I banks may permit the advance remittance subject to the above conditions
and a specific waiver of bank guarantee from the Ministry of Finance,
Government of India, where the advance payments is equivalent to or
exceeds USD 100,000/- (USD one hundred thousand only).
C.1.3. Advance Remittance for Import of Aircrafts/Helicopters and other
Aviation Related Purchases

As a sector specific measure, airline companies which have been permitted by the
Directorate General of Civil Aviation to operate as a schedule air transport service,
can make advance remittance without bank guarantee, up to USD 50 million.
Accordingly, AD Category – I banks may allow advance remittance, without obtaining
a bank guarantee or an unconditional, irrevocable Standby Letter of Credit, up to
USD 50 million, for direct import of each aircraft, helicopter and other aviation related
purchases. The remittances for the above transactions shall be subject to the
following conditions:

i. The AD Category - I banks should undertake the transactions based on their

commercial judgment and after being satisfied about the bonafide of the
transactions. KYC and due diligence exercise should be done by the AD
Category-I banks for the Indian importer entity and the overseas manufacturer
company as well.
ii. Advance payments should be made strictly as per the terms of the sale
contract and are made directly to the account of the manufacturer (supplier)
concerned.
iii. AD Category - I bank may frame their own internal guidelines to deal with
such cases, with the approval of their Board of Directors.
iv. In the case of a Public Sector Company or a Department / Undertaking of
Central /State Governments, the AD Category - I bank shall ensure that the
requirement of bank guarantee has been specifically waived by the Ministry of
Finance, Government of India for advance remittances exceeding USD
100,000.
v. Physical import of goods into India is made within six months (three years in
case of capital goods) from the date of remittance and the importer gives an
undertaking to furnish documentary evidence of import within fifteen days
from the close of the relevant period. It is clarified that where advance is paid
as milestone payments, the date of last remittance made in terms of the
contract will be reckoned for the purpose of submission of documentary
evidence of import.
vi. Prior to making the remittance, the AD Category – I bank may ensure that the
requisite approval of the Ministry of Civil Aviation / DGCA / other agencies in
terms of the extant Foreign Trade Policy has been obtained by the company,
for import.
vii. In the event of non-import of aircraft and aviation sector related products, AD
Category - I bank should ensure that the amount of advance remittance is
immediately repatriated to India.

Prior approval of the concerned Regional Office of the Reserve Bank will be required
in case of any deviation from the above stipulations.

C.1.4. Advance Remittance for the Import of Services

AD Category – I bank may allow advance remittance for import of services without
any ceiling subject to the following conditions:
(a) Where the amount of advance exceeds USD 500,000 or its equivalent, a
guarantee from a bank of international repute situated outside India, or a guarantee
from an AD Category – I bank in India, if such a guarantee is issued against the
counter-guarantee of a bank of international repute situated outside India, should be
obtained from the overseas beneficiary.

(b) In the case of a Public Sector Company or a Department/ Undertaking of the

Government of India/ State Governments, approval from the Ministry of Finance,
Government of India for advance remittance for import of services without bank
guarantee for an amount exceeding USD 100,000 (USD One hundred thousand) or
its equivalent would be required.

(c) AD Category – I banks should also follow-up to ensure that the beneficiary of the
advance remittance fulfils his obligation under the contract or agreement with the
remitter in India, failing which, the amount should be repatriated to India.

C.2. Interest on Import Bills

(i) AD – Category – I bank may allow payment of interest on usance bills or overdue
interest for a period of less than three years from the date of shipment at the rate
prescribed for trade credit from time to time.

(ii) In case of pre-payment of usance import bills, remittances may be made only
after reducing the proportionate interest for the unexpired portion of usance at the
rate at which interest has been claimed or LIBOR of the currency in which the goods
have been invoiced, whichever is applicable. Where interest is not separately
claimed or expressly indicated, remittances may be allowed after deducting the
proportionate interest for the unexpired portion of usance at the prevailing LIBOR of
the currency of invoice.

C.3. Remittances against Replacement Imports

Where goods are short-supplied, damaged, short-landed or lost in transit and the
Exchange Control Copy of the import licence has already been utilised to cover the
opening of a letter of credit against the original goods which have been lost, the
original endorsement to the extent of the value of the lost goods may be cancelled by
the AD Category – I bank and fresh remittance for replacement imports may be
permitted without reference to Reserve Bank, provided, the insurance claim relating
to the lost goods has been settled in favour of the importer. It may be ensured that
the consignment being replaced is shipped within the validity period of the license.

C.4. Guarantee for Replacement Import

In case replacement goods for defective import are being sent by the overseas
supplier before the defective goods imported earlier are reshipped out of India, AD
Category-I banks may issue guarantees at the request of importer client for
dispatch/return of the defective goods, according to their commercial judgment.
C.5. Import of Equipment by Business Process Outsourcing (BPO) Companies
for their Overseas Sites

AD Category – I bank may allow BPO companies in India to make remittances

towards the cost of equipment to be imported and installed at their overseas sites in
connection with the setting up of their International Call Centres (ICCs) subject to the
following conditions:

(i) The BPO company should have obtained necessary approval from the Ministry of
Communications and Information Technology, Government of India and other
authorities concerned for setting up of the ICC.

(ii) The remittance should be allowed based on the AD Category - I banks’

commercial judgment, the bonafides of the transactions and strictly in terms of the
contract.

(iii) The remittance is made directly to the account of the overseas supplier.

(iv) The AD Category – I banks should also obtain a certificate as evidence of import
from the Chief Executive Officer (CEO) or auditor of the importer company that the
goods for which remittance was made have actually been imported and installed at
overseas sites.

C.6. Receipt of Import Bills/Documents by the Importer Directly from Overseas

Suppliers.

(A) Import bills and documents should be received from the banker of the supplier
by the banker of the importer in India. AD Category – I bank should not, therefore,
make remittances where import bills have been received directly by the importers
from the overseas supplier, except in the following cases:

(i) Where the value of import bill is less than USD 300,000.

(ii) Import bills received by wholly-owned Indian subsidiaries of foreign companies

from their principals.

(iii) Import bills received by Status Holder Exporters as defined in the Foreign Trade
Policy, 100% Export Oriented Units / Units in Special Economic Zones, Public Sector
Undertakings and Limited Companies.

(iv) Import bills received by all limited companies viz. public limited, deemed public
limited and private limited companies.

(B) While undertaking such transactions, the AD Category – I banks must ensure
that :

(i) The import transactions are as per the prevailing Foreign Trade Policy.
(ii) The transactions are based on their commercial judgment and they are satisfied
about the bonafides of the transactions.
(iii) AD Category - I banks should do the KYC and due diligence exercise and should
be fully satisfied about the financial standing / status and track record of the importer
customer. Before extending the facility, they should also obtain a report on each
individual overseas supplier from the overseas banker or reputed overseas credit
rating agency.
(iv) Before extending the facility, the AD Category – I bank should obtain a report on
each individual overseas supplier from the overseas banker or a reputed overseas
credit agency. However, such credit report on the overseas supplier need not be
obtained in cases where the invoice value does not exceed USD 300,000 provided
the AD Category – I bank is satisfied about the bonafides of the transaction and track
record of the importer constituent.

C.7. Evidence of Import

C.7.1. Physical Imports

(i) In case of all imports, where value of foreign exchange remitted / paid for import
into India exceeds USD 100,000 or its equivalent, it is obligatory on the part of the
AD Category – I bank through whom the relative remittance was made, to ensure
that the importer submits :-

(a) The Exchange Control Copy of the Bill of Entry for home consumption, or

(b) The Exchange Control Copy of the Bill of Entry for warehousing, in case of
100% Export Oriented Units, or

(c) Customs Assessment Certificate or Postal Appraisal Form, as declared by the

importer to the Customs Authorities, where import has been made by post, as
evidence that the goods for which the payment was made have actually been
imported into India.

(ii) In respect of imports on D/A basis, AD Category – I bank should insist on

production of evidence of import at the time of effecting remittance of import bill.
However, if importers fail to produce documentary evidence due to genuine reasons
such as non- arrival of consignment, delay in delivery/ customs clearance of
consignment, etc., AD bank may, if satisfied with the genuineness of request, allow
reasonable time, not exceeding three months from the date of remittance, to the
importer to submit the evidence of import.

C.7.2. Evidence of Import in Lieu of Bill of Entry

(i) AD Category – I bank may accept, in lieu of Exchange Control Copy of Bill of
Entry for home consumption, a certificate from the Chief Executive Officer (CEO) or
auditor of the company that the goods for which remittance was made have actually
been imported into India provided :-

(a) The amount of foreign exchange remitted is less than USD 1,000,000 or its
equivalent.
(b) The importer is a company listed on a stock exchange in India and whose net
worth is not less than Rs.100 crore as on the date of its last audited balance sheet,
or, the importer is a public sector company or an undertaking of the Government of
India or its departments.

(ii) The above facility may also be extended to autonomous bodies, including
scientific bodies/academic institutions, such as Indian Institute of Science / Indian
Institute of Technology, etc. whose accounts are audited by the Comptroller and
Auditor General of India (CAG). AD Category – I bank may insist on a declaration
from the auditor/CEO of such institutions that their accounts are audited by CAG.

C.7.3. Non-physical Imports

(i) Where imports are made in non-physical form, i.e., software or data through
internet / datacom channels and drawings and designs through e-mail / fax, a
certificate from a Chartered Accountant that the software / data / drawing/ design has
been received by the importer, may be obtained.

(ii) AD Category – I bank should advise importers to keep Customs Authorities

informed of the imports made by them under this clause.

C.8. Issue of Acknowledgement

AD Category – I bank should acknowledge receipt of evidence of import e.g.

Exchange Control Copy of the Bill of Entry, Postal Appraisal Form or Customs
Assessment Certificate, etc., from importers by issuing acknowledgement slips
containing all relevant particulars relating to the import transactions.

C.9. Verification and Preservation

(i) Internal inspectors or auditors (including external auditors appointed by AD

Category – I bank) should carry out verification of the documents evidencing import,
e.g. Exchange Control copies of Bills of Entry or Postal Appraisal Forms or Customs
Assessment Certificates, etc.

(ii) Documents evidencing import into India should be preserved by AD Category – I

bank for a period of one year from the date of its verification. However, in respect of
cases which are under investigation by investigating agencies, the documents may
be destroyed only after obtaining clearance from the investigating agency
concerned.

C.10. Follow-up for Import Evidence

(i) In case an importer does not furnish any documentary evidence of import, as
required under paragraph C.7. of Section III, within 3 months from the date of
remittance involving foreign exchange exceeding USD 100,000, the AD Category – I
bank should rigorously follow-up for the next 3 months, including issuing registered
letters to the importer.
 (ii) AD Category – I bank should forward a statement on half-yearly basis as at the
end of June & December of every year, in form BEF furnishing details of import
transactions, exceeding USD 100,000 in respect of which importers have defaulted
in submission of appropriate document evidencing import within 6 months from the
date of remittance, to the Regional Office of Reserve Bank under whose jurisdiction
the AD Category – I bank is functioning, within 15 days from the close of the half-
year to which the statement relates.

(iii) AD Category – I bank need not follow up submission of evidence of import

involving amount of USD 100,000 or less provided they are satisfied about the
genuineness of the transaction and the bonafides of the remitter. A suitable policy
may be framed by the bank's Board of Directors and AD Category – I bank may set
their own internal guidelines to deal with such cases.

C.11. Issue of Bank Guarantee

AD Category – I banks are permitted to issue guarantee on behalf of their importer

customers in terms of Notification No. FEMA 8/2000-RB dated May 3, 2000, as
amended from time to time.

C.12. Import of Gold

C.12.1. Import of Gold by Nominated Banks / Agencies/Entities

i. The import of gold should be strictly in accordance with the extant Foreign
Trade Policy.
ii. Import of gold in the form of coins and medallions is now prohibited.
iii. Import of gold on consignment basis is permitted only to meet the genuine
needs of exporters of gold jewellery.
iv. All Letters of Credit (LC) to be opened by Nominated Banks for import of gold
will be only on 100% cash margin basis. All imports of gold will necessarily have
to be on Documents against Payment (DP) basis.
v. All Nominated Banks/Agencies and other entities to ensure that at least 20%, of
every lot of import of gold imported to the country is exclusively made available
for the purpose of exports and the balance for domestic use.
vi. Nominated Banks/ Agencies and other entities shall make available gold for
domestic use only to the entities engaged in jewellery business/bullion dealers
and to banks authorised to administer the Gold Deposit Scheme, against full
upfront payment only.
vii. The Nominated Banks/Agencies/Refineries and other entities shall ensure that
there is no front loading of imports, particularly in the first and second lots of
imports. Such imports shall be linked to normal quantities of gold supplied to the
exporters by the nominated banks/agencies and shall not exceed the highest
quantity supplied during any one year out of last three years. In case of
nominated banks do not have previous record of having supplied gold to the
 exporters; they would need to seek prior approval from RBI before placing
orders for import of gold for the first lot under the 20/80 scheme.
viii. Entities/units in the SEZ and EoUs, Premier and Star Trading Houses are
permitted to import gold exclusively for the purpose of exports only.
ix. Head Offices / International Banking Divisions of AD Category - I banks shall
henceforth submit the following statements to: The Chief General Manager,
Reserve Bank of India, Foreign Exchange Department, Central Office, Trade
Division, Amar Building, Fort, Mumbai-400001. The statements may also be
sent by email.

(a) Statement on half yearly basis (end March / end September), showing
the quantity and value of gold imported by the nominated banks/ agencies/
EOUs/ SEZs in Gem & Jewellery Sector, mode of payment-wise, as per
Annex-1.

(b) Statement on monthly basis showing the quantity and value of gold
imports by the nominated agencies (other than the nominated banks)/ EOUs/
SEZs in Gem & Jewellery sector during the month under report as well as the
cumulative position as at the end of the said month beginning from the 1st
month of the Financial Year, as per Annex - 2.

Both the statements shall be submitted, even if there is 'Nil' position and they should
reach the aforesaid office of RBI by the 10th of the following month / half year, to
which it relates.

C.12.2. Import of Gold under AA/DFIA Scheme

i. Entities holding Advance Authorisation (AA) / Duty Free Import Authorisation

(DFIA) need not follow the sequence of first import and then export if the
export obligation has been met before August 14, 2013.
ii. Any authorisation such as Advance Authorisation (AA) / Duty Free Import
Authorization (DFIA) is to be utilised for import of gold meant for export
purposes only and no diversion for domestic use shall be permitted. For any
AA / DFIA issued prior to 14th August 2013, the condition of sequencing the
imports prior to exports shall not be insisted upon even in case of entities/units
in SEZ & EOUs, Premier & Star Trading Houses.
iii. Notwithstanding any of the foregoing directions, entities/units in the SEZ and
EoUs, Premier and Star Trading Houses (irrespective of whether they are
nominated agencies or not) are permitted to import gold exclusively for the
purpose of exports only. Similarly, exports towards fulfilment of obligation
under AA/DFIA scheme shall not qualify as export for the purpose of the
scheme of 20:80.
C.12.3. Import of Gold by STH/PTH

Star Trading Houses / Premier Trading Houses (STH/PTH) which are registered as
nominated agencies by the Director General of Foreign Trade (DGFT) may import
gold under 20:80 scheme subject to the following conditions:

a) The STH/PTH should have imported gold prior to the introduction of 20:80
scheme. STH / PTH should get the required verification done by the
Department of Customs at any port where they have imported gold
consignment in the past.
b) The first lot of gold under this scheme would be based on the highest monthly
import during any of the last 24 months prior to the RBI’s notification dated
August 14, 2013, subject to a maximum of 2000 Kgs.
c) As in the case of other nominated agencies, the eligible quantity may be
imported by STH / PTHs from any port, subject to their eligibility limit /
maximum quantity allowed to them.
d) For proper compliance, before import, they must submit the import plan, port-
wise and quantity-wise, to the concerned Customs office, where the verification
of the figures of past performance was done. This information will be sent to all
the other ports from which imports are permitted. The overall discipline of
exporting 20% of each imported consignment before the next consignment is
imported will be equally applicable to such STH/PTH importers.

C.12.4. Import of Gold Jewellery Including Jewellery Made of Precious Metals

or/and Studded With Diamonds / Precious Stones /Semi-precious.

i. Import of gold in form of Jewellery/ Mounting’s, etc; is outside the purview of

20:80 Scheme.
ii. Suppliers’ and Buyers’ credit (trade credit) including the usance period of
Letters of Credit opened for import of gold in any form, including jewellery
made of gold/precious metals or/and studded with diamonds/semi-
precious/precious stones, should not exceed 90 days from the date of
shipment.

C.12.5. Replenishment Scheme for Gold Imports

The Nominated Banks / Agencies / Entities may make available gold to the exporters
(other than AA/DFIA holders) operating under the Replenishment Scheme. They can
resort to import of gold for the purpose, if considered necessary. However, such
import will be accounted for separately and will not entitle them for any further
import.

C.12.6. Import of Gold Dore

i. The refiners are allowed to import Gold Dore equal to 15% of their licence for
each of the first two months.
 ii. In case, the quantity has already been identified by DGFT for first two lots,
import of such quantity will be in compliance with the guidelines issued vide
( A.P. (DIR Series) Circular No. 82 dated December 31, 2013. )
iii. DGFT, through a notification, may include new refiners, and fix licenced
quantity for them.
iv. Before the next import, not more than 80% shall be allowed to be sold
domestically.
v. The dore so imported shall be refined and shall be released based on FIFO
basis following 20:80 principle. This would be monitored by CBEC.
vi. The imports, thereafter, shall be allowed only up to 5 times the quantum for
which proof of export has been submitted. This shall be on accrual basis.
vii. Import of gold in the third lot onwards will be lesser of the two:
a. Five times the export for which proof has been submitted; or
b. Quantity of gold permitted to a Nominated Agency in the first or second
lot.

C.12.7. Import of Gold by SEZ and EOUs

AD Category – I bank can open Letters of Credit and allow remittances on behalf of
EOUs, units in SEZs in the Gem & Jewellery Sector and the nominated agencies /
banks, for direct import of gold, subject to the following:

(i) The import of gold should be strictly in accordance with the extant Foreign Trade
Policy.

(ii) Banker's prudence should be strictly exercised for all transactions pertaining to
import of gold. AD Category – I bank should ensure that due diligence is undertaken
and all Know Your Customer (KYC) norms and the Anti-Money-Laundering
guidelines, issued by Reserve Bank from time to time are adhered to while
undertaking such transactions. AD Category – I bank should closely monitor such
transactions. Any large or abnormal increase in the volume of business of the
importer should be closely examined to ensure that the transactions are bonafide
trade transactions.

(iii) In addition to carrying out the normal due diligence exercise, the credentials of
the supplier should also be ascertained before opening the LCs. The financial
standing, line of business and the net worth of the importer customer should be
commensurate with the volume of business turnover. Apart from the above, in case
of such transactions, banks should also make discreet enquiries from other banks to
assess the actual position. Further, in order to establish audit trail of import/export
transactions, all documents pertaining to such transactions must be preserved for at
least five years.

(iv) AD Category – I bank should follow up submission of the Bill of Entry by the
importers as stipulated.

C.12.8. Import of Gold on Loan Basis

(i) Nominated Agencies / Authorised Banks can import gold on loan basis only for on
lending to exporters of gold jewellery.
(ii) EOUs and Units in SEZ who are in the Gem and Jewellery Sector can import gold
on loan basis for manufacturing and export of jewellery on their own account only.

(iii) The maximum tenor of gold loan would be as per the Foreign Trade Policy 2009-
2014, or as notified by the Government of India from time to time in this regard.

(iv) AD bank may open Standby Letters of Credit (SBLC) for import of gold on loan
basis, where ever required, as per FEDAI guidelines dated April 1, 2003. The tenor
of the SBLC should be in line with the tenor of the gold loan.

(v) SBLC can be opened only on behalf of entities permitted to import gold on loan
basis, viz. Nominated Agencies and 100% EOUs/units in SEZ, which are in the Gem
and Jewellery Sector.

(vi) SBLC should be in favour of internationally renowned bullion banks only. AD

Category – I bank can obtain a detailed list of internationally renowned bullion banks
from the Gem & Jewellery Export Promotion Council.

All other existing instructions on import of gold and opening of Letters of Credit, with
usance period not exceeding 90 days, will continue to be applicable.

C.12.9. Import of Gold on Unfixed Price basis

Nominated Agency/Bank may import gold on unfixed price basis subject to the
condition that although ownership of the gold shall be passed on to the importer at
the time of import itself, the price of gold shall be fixed later, as and when the
importer sells the gold to the users but within the permissible time period for settling
the transaction.

C.13. Import of Other Precious Metals

C.13.1. Import of Platinum /Palladium/Rhodium/Silver/ Rough, Cut & Polished

Diamonds / Precious and Semi-precious Stones.

(a) Suppliers’ and Buyers’ Credit, including the usance period of Letters of Credit
opened for import of Platinum, Palladium, Rhodium and Silver and rough, cut and
polished Diamonds, Precious and semi-precious stones; should not exceed 90 days
from the date of shipment.

(b) AD Category – I banks should ensure that due diligence is undertaken and Know
Your Customer (KYC) norms and Anti-Money Laundering (AML) guidelines, issued
by the Reserve Bank are adhered to while undertaking import of the metals and
rough, cut and polished diamonds. Further, any large or abnormal increase in the
volume of business should be closely examined to ensure that the transactions are
bonafide and are not intended for interest / currency arbitrage.
C.13.2. Import of / Platinum / Silver on Unfixed Price Basis

The nominated agency/bank may import platinum and silver, on outright purchase
basis subject to the condition that although ownership of the same shall be passed
on to the importer at the time of import itself, the price of shall be fixed later, as and
when the importer sells to the users but within the permissible time period for settling
the transaction.

C.13.3. Import of Gold in Any Form Including Jewellery Made of Gold/Precious

Metals Or/And Studded with Diamonds/ Precious /Semi-precious Stones

The usance period of Letters of Credit opened for import of gold in any form
including jewellery made of gold/precious metals or/and studded with diamonds/semi
precious/precious stones should not exceed 90 days from the date of shipment and
only on 100 per cent cash margin basis.

C.14. Import Factoring

(i) AD Category – I bank may enter into arrangements with international factoring
companies of repute, preferably members of Factors Chain International, without the
approval of Reserve Bank.

(ii) They will have to ensure compliance with the extant foreign exchange directions
relating to imports, Foreign Trade Policy in force and any other guidelines/directives
issued by Reserve Bank in this regard.

C.15. Merchanting Trade

C.15.1. For a trade to be classified as Merchanting Trade following conditions should

be satisfied:
a. Goods acquired should not enter the Domestic Tariff Area and
b. The state of the goods should not undergo any transformation.

C.15.2. AD Category – I bank may handle bonafide Merchanting Trade Transactions

and ensure that:
(a) Goods involved in the transactions are permitted for export / import under the
prevailing Foreign Trade Policy (FTP) of India as on the date of shipment and all
the rules, regulations and directions applicable to export (except Export
Declaration Form) and import (except Bill of Entry) are complied with for the
export leg and import leg, respectively,
(b) Both the legs of a Merchanting Trade Transaction are routed through the same
AD bank. The bank should verify the documents like invoice, packing list,
transport documents and insurance documents (if originals are not available,
Non-negotiable copies duly authenticated by the bank handling documents may
be taken) and satisfy itself about the genuineness of the trade.
(c) The entire Merchanting Trade Transactions should be completed within an
overall period of nine months and there should not be any outlay of foreign
exchange beyond four months.
(d) The commencement of Merchanting Trade would be the date of shipment /
export leg receipt or import leg payment, whichever is first. The completion date
would be the date of shipment / export leg receipt or import leg payment,
whichever is the last;
(e) Short-term credit either by way of suppliers' credit or buyers' credit will be
available for Merchanting Trade Transactions, to the extent not backed by
advance remittance for the export lag, including the discounting of export leg LC
by an AD bank, as in the case of import transactions ;
(f) In case advance against the export leg is received by the Merchanting Trader,
AD bank should ensure that the same is earmarked for making payment for the
respective import leg. However, AD bank may allow short-term deployment of
such funds for the intervening period in an interest bearing account;
(g) Merchanting Traders may be allowed to make advance payment for the import
leg on demand made by the overseas seller. In case where inward remittance
from the overseas buyer is not received before the outward remittance to the
overseas supplier, AD bank may handle such transactions by providing facility
based on commercial judgement. It may, however, be ensured that any such
advance payment for the import leg beyond USD 200,000/- per transaction, the
same should be paid against Bank Guarantee / LC from an international bank of
repute, except in cases and to the extent where payment for export leg has been
received in advance;
(h) Letter of Credit to the supplier is permitted against confirmed export order
keeping in view the outlay and completion of the transaction within nine months;
(i) Payment for import leg may also be allowed to be made out of the balances in
Exchange Earners Foreign Currency Account (EEFC) of the Merchant Trader.
(j) AD bank should ensure one-to-one matching in case of each Merchanting Trade
transaction and report defaults in any leg by the traders to the concerned
Regional Office of RBI, on half yearly basis in the format as given in Annex 3,
within 15 days from the close of each half year, i.e. June and December.
(k) The names of defaulting Merchanting Traders, where outstanding reaches 5% of
their annual export earnings, would be Caution-listed.
(l) The KYC and AML guidelines should be observed by the AD bank while handling
such transactions.

The Merchanting Traders have to be genuine traders of goods and not mere
financial intermediaries. Confirmed orders have to be received by them from the
overseas buyers. AD banks should satisfy themselves about the capabilities of the
Merchanting Trader to perform the obligations under the order. The overall
Merchanting Trade should result in reasonable profits to the Merchanting Trader.

*****
 Appendix

Consolidated List of Circulars on Import of Goods and Services

Sr. Circular No Subject Date of Circular

No
1 AP(DIR Series) Circular No. 106 Import of goods and services into June 19, 2003
India.
2 AP(DIR Series) Circular No. 4 Merchanting Trade Transactions July 19, 2003
– Clarifications - Short term credit
3 AP(DIR Series) Circular No. 9 Evidence of Import – August 18, 2003
Liberalisation
4 AP(DIR Series) Circular No. 15 Advance Remittance for Imports September 17,
2003
5 AP(DIR Series) Circular No. 49 Advance Remittance for Imports December 15,
2003
6 AP(DIR Series) Circular No. 66 Imports into India – Direct February 6, 2004
Receipt of Import
Bills/Documents

7 AP(DIR Series) Circular No. 72 Foreign Exchange Management February 20,

Act, 1999 - Import of Goods into 2004
India – Evidence of Import
8 AP(DIR Series) Circular No. 2 Import of Gold by (i) Export July 9, 2004
Oriented Units (EOUs), (ii) Units
in SEZ/EPZ, and (iii) Nominated
Agencies
9 AP(DIR Series) Circular No. 34 Import of Gold on Loan Basis – February 18,
Tenor of Loan and Opening of 2005
Stand-By Letter of Credit
10 AP(DIR Series) Circular No. 1 Import of Goods of Value USD July 12, 2005
100,000 and Less -Clarification
on Follow up for Evidence of
Import
11 AP(DIR Series) Circular No. 33 Liberalisation of Export and February 28,
Import procedures 2007
12 AP(DIR Series) Circular No. 34 Import of Goods of Value USD March 2, 2007
100,000 and Less -Clarification
on Follow up for Evidence of
Import
13 AP(DIR Series) Circular No. 63 Import of Equipments by BPO May 25, 2007
Companies in India for
International Call Centre
14 AP(DIR Series) Circular No. 77 Advance Remittance for Import June 29, 2007
of aircrafts / helicopters / other
aviation related purchases
15 AP(DIR Series) Circular No. 18 Direct Receipt of Import Bills / November 7,
Documents - Liberalisation 2007
16 AP(DIR Series) Circular No. 37 Direct Receipt of Import Bills / April 16, 2008
 Documents for Import of Rough
Precious & Semi-Precious
Stones
17 AP(DIR Series) Circular No. 03 Advance Remittance for Import August 4, 2008
of Rough Diamonds
18 AP(DIR Series) Circular No. 08 Advance Remittance for Import August 21, 2008
of Rough Diamonds
19 AP(DIR Series) Circular No. 09 Foreign Exchange Management August 21, 2008
Act, 1999- Advance Remittance
for Import of Goods -
Liberalisation
20 AP(DIR Series) Circular No. 12 Foreign Exchange Management August 28, 2008
Act, 1999 – Import of Platinum /
Palladium / Rhodium / Silver
21 AP(DIR Series) Circular No. 13 Direct Receipt of Import Bills / September 1,
Documents - Liberalisation 2008
22 AP(DIR Series) Circular No. 15 Foreign Exchange Management September 8,
Act, 1999 – Advance 2008
Remittances for Import of
Services
23 AP(DIR Series) Circular No.21 Advance Remittance for Import December 29,
of Rough Diamonds 2009
24 AP(DIR Series) Circular No.56 Advance Remittance for Import April 29, 2011
of Goods – Liberalisation
25 AP(DIR Series) Circular No. 59 Import of rough, cut and polished May 06, 2011
diamonds
26 AP(DIR Series) Circular No. 82 Release of Foreign Exchange for February 21,
Imports – Further Liberalisation 2012
27 AP(DIR Series) Circular No. 83 Import of Gold on Loan Basis - February 27,
Tenor of Loan and Opening of 2012
Stand - By Letter of Credit
28 AP(DIR Series) Circular No. 103 Data on import of Gold – April 03, 2012
Statements – Modification
29 AP(DIR Series) Circular No.83 Import of precious and semi February 20,
precious stones- Clarification 2013
30 AP(DIR Series) Circular No.103 Import of Gold by Nominated May 13, 2013
Banks/Agencies
31 AP(DIR Series) Circular No.107 Import of Gold by Nominated June 4, 2013
Banks/Agencies
32 AP(DIR Series) Circular No. 122 Import of Gold by Nominated June 27, 2013
Banks/Agencies
33 AP(DIR Series) Circular No.15 Import of Gold by Nominated July 22, 2013
Banks /Agencies/Entities
34 AP(DIR Series) Circular No.39 Export import of Currency September 6,
2013
35 AP(DIR Series) Circular No.70 Third party payments for export / November 8 ,
import transactions 2013
36 AP(DIR Series) Circular No.71 Advance Remittance for Import November 8,
of Rough Diamonds 2013
37 AP(DIR Series) Circular No.73 Import of Gold by Nominated November 11,
Banks /Agencies/Entities 2013
38 AP(DIR Series) Circular No. 75 Trade Credit for imports into November 19,
India- Online submission of data 2013
on issuance of Guarantee/Letter
of Undertaking (LoU)/Letter of
Comfort (LoC) by ADs
39 AP(DIR Series) Circular No.82 Import of Gold by Nominated December 31,
Banks/Agencies/Entities 2013
40 AP(DIR Series) Circular No.95 Merchanting Trade Transactions January 17, 2014
41 AP(DIR Series) Circular No.100 Third party payments for export / February 04,
import transactions 2014
42 AP(DIR Series) Circular No.103 Import of Gold / Gold Dore by February 14,
Nominated Banks /Agencies 2014
/Entities - Clarifications
43 AP(DIR Series) Circular No.115 Merchanting Trade Transactions March 28, 2014
- Revised guidelines
44 A P (DIR Series) Circular No.116 Advance Remittance for Import April 01, 2014
of Rough Diamonds
45 AP(DIR Series) Circular No.122 Trade Credits for Imports into April 10, 2014
India – Review of all-in-cost
ceiling
46 AP(DIR Series) Circular No.133 Import of Gold by Nominated May 21, 2014
Banks / Agencies / Entities