RBI allows authorised banks to sanction 'set-off'

With a view to liberalising the export-import procedures, RBI today decided to delegate to authorised banks the power of sanctioning 'set-off', under which an item or amount is allowed to be set off against another in the settlement of accounts.

Earlier, set-off in export receivables against import payables -- in respect of the same overseas buyer and supplier -- was allowed only with sanction of the Reserve Bank.

"It has now been decided to delegate the power to Authorised Dealer Category I banks to allow such set off with immediate effect," the Reserve Bank said in a circular.

It said, however, that the import has to be as per the Foreign Trade Policy in force.

Besides, invoices or bills and exchange control copies of bills of entry for home consumption have to be submitted by the importer to the authorised dealer bank.

The payment for the import has to be maintained as outstanding in the books of the importer.

Exporters and importers availing of the facility will have to report both the transactions of sale and purchase separately in returns.

"The 'set-off' of export receivables against import payments should be in respect of the same overseas buyer and supplier and that consent for 'set-off' has been obtained from him. All the relevant documents are submitted to the concerned AD bank who should comply with all the regulatory requirements relating to the transactions," RBI said.

Source: Business Standard