GENERAL PERMISSION FOR RECEIPT OF ADVANCE PAYMENTS AGAINST EXPORTS

Advance Payments against Exports

In terms of Regulation 16 of Notification No. FEMA 23 dated May 3, 2000, 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 -

1. the shipment of goods is made within one year from the date of receipt of advance payment;
   
2. the rate of interest, if any, payable on the advance payment does not exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points, and
   
3. 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 unutilised 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.

(2) Where the export agreement provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment, the exporter shall require the prior approval of the Reserve Bank.

(3) AD Category – I banks may allow the purchase of foreign exchange from the market for refunding advance payment credited to EEFC account only after utilising the entire balances held in the exporter’s EEFC accounts maintained at different branches/banks.