RBI requirements

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Vinod Krishna

Vinod Krishna (Querist)
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13 December 2010 Hi,
I just want to know the RBI requirment for setting off of Debtors with creditors.

CA Shailesh Kumar Bhagat

CA Shailesh Kumar Bhagat (Expert)
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13 December 2010 Question is not clear?

You mean to say, " foreign currency receivable and payable adjustments " or something else.

Pls provide more deatils for these type of questions.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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20 July 2025 The RBI requirements for setting off of debtors with creditors, especially in the context of foreign exchange transactions, are governed under the Foreign Exchange Management Act (FEMA), 1999, and related RBI guidelines. Here's a concise breakdown:

🔁 Set-off of Debtors and Creditors (Cross-border Transactions)
If you're talking about setting off receivables (export proceeds) against payables (import dues) with the same party or group company, here's what applies:

✅ Permissibility

Set-off of export receivables against import payables is permitted by RBI, but subject to conditions.

📜 Relevant Circular
RBI Master Direction: Export of Goods and Services

Refer to Master Direction No. 16/2015-16 (as updated)
✅ Key RBI Conditions for Set-Off:
Same Entity or Group Company:
The set-off must be with the same party (or its group/associate company) under a valid agreement.
Authorised Dealer (AD) Bank Approval:
You must approach your Authorised Dealer (your bank) with all documents. AD Bank can approve the set-off under delegated powers.
Documentation Required:
Invoices of exports and imports
Customs documents (Shipping Bill/Bill of Entry)
Foreign Inward Remittance Certificate (FIRC) if available
Set-off agreement with the counterparty
Timelines:
Export proceeds should be realized within the time limit prescribed (generally 9 months).
Imports must be settled within 6 months.
Netting-off Allowed When:
There’s a bonafide business transaction
Proper book entries are maintained
No money laundering or FEMA violations are suspected
Reporting:
Set-off transactions should be reported to the RBI through the AD bank.
Use appropriate forms such as Form EDF or Softex, depending on the nature of export.
🛑 Not Permitted For:
Unrelated parties without valid contracts
Transactions involving capital account nature unless specifically permitted
Where RBI approval is explicitly required
🧾 Example:
Company A in India exports goods worth $50,000 to Company B in the US and also imports $45,000 of machinery from the same company. Instead of making and receiving separate payments, they request the bank to allow a net settlement of $5,000 receivable.

With proper documentation and declaration, the AD bank can approve this set-off.

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