Exporters, trade bodies welcome RBI move to scrap system-based caution-listing of exporters

Several export promotion councils and trading communities have hailed the RBI’s recent move to scrap the system-based automatic caution-listing of exporters besides welcoming the decision to shift the onus of caution-listing an exporter entirely on the Authorised Dealer (AD) banks.

However, commercial banking experts and international business consultants believe that while the RBIs’ move could give a big relief to exporters during these difficult times, the permanent removal of fixed time frame for export realisation and leaving the decision entirely on the banks will defeat the whole purpose of caution listing and identifying wilful defaulters.

Terming the removal of automatic caution-listing as a ‘good step from ease of doing business angle’ Rajesh P, Managing Director of Mumbai-based GrowTrust Ventures Consultancy said, “Given practical challenges, few banks might report their customers in the caution list.”

A former corporate and investment banker himself, Rajesh said, “Perhaps there could be separate categories like ‘exporters with delayed realisations’ with the objective to discourage delays beyond reasonable periods especially for larger amounts.”

In 2014, the RBI introduced the Export Data Processing and Monitoring System (EDPMS). Under this, banks are mandated to bring all transactions with the exporters online. Two years later, the central bank introduced system-based automatic caution-listing wherein exporters were put on the list if any shipping bill remained open for more than two years in EDPMS. Such listing served as a deterrent for an exporter to avail any fresh bank credit.

Export-friendly move

However, in its Monetary Policy Committee (MPC) meeting held last week the central bank said that it has decided to discontinue the system-based automatic caution-listing to make the process exporter-friendly and equitable.

“In this environment, it is crucial to provide flexibility to exporters in the realisation of export proceeds and to empower them to negotiate better terms with overseas buyers,” RBI Governor Shaktikanta Das said while announcing the decisions taken by the MPC.

FIEO welcomes move

The Federation of Indian Export Organisation (FIEO), in a press statement, said that the automatic caution-listing was a ‘threat’ to exporters and thanked the RBI's for meeting its long pending demand.

The export promotion body also said that the new mechanism strikes a nice balance between the responsibilities of exporters and bankers while simultaneously ensuring that realisation of exports proceeds is constantly monitored.

However, international business experts say that shifting the onus of caution-listing exporters entirely on the banks will only create more confusion to exporters as each bank may provide a different time frame realisation for different kinds and sizes of exporters.

“The RBI’s recent policy decision on ‘discontinuing the system based automatic caution-listing’ on exporters may have brought a great relief to the exporters,” Smita Santoki of Symbiosis Institute of International Business, Pune said, adding, “However, the onus lies upon the bankers now, as to how efficiently they are able to manage it across all spectrums. This is important again for being fair to exporters all across the regions of the country.”

However, Rajat Verma, Head-Commercial Banking, HSBC India said that the change in the process of caution-listing does not absolve either the banks or exporters and that the various guidelines with respect to exports, including receipt of funds in a time-bound manner and reporting of the same to regulators.

“Previously, a few pending transactions meant that even exporters with a strong track record of export realisation were getting caution listed,” Verma said, adding, “Under the new guidelines, banks will need to put up a robust framework, taking into consideration various parameters such as exporter history, percentage of outstanding transactions vis-à-vis total exports and others. This will ensure that exporters will be able to access their banking needs, while banks will have robust controls in place to report chronic and willful defaulters.”