What changed
Previously, only ECGC-settled claims could be written off from the XOS statement. Now, claims settled by any insurance company regulated by IRDA are also eligible for write-off. The earlier 10% cap on such write-offs has been removed.
What it means for you
Banks can now clean up their XOS statements more comprehensively, reducing regulatory reporting burden. Exporters get faster closure on outstanding bills, improving their working capital cycle. However, claim amounts in rupees must not be treated as export realisation in foreign exchange or credited to EEFC accounts.
What you must do
- Update internal write-off policies to include claims from all IRDA-registered insurers, not just ECGC.
- Verify documentary evidence from the insurer confirming claim settlement and surrender of export incentives before processing write-off.
- Ensure claim amounts in rupees are not credited to EEFC accounts or treated as foreign exchange realisation.
- Communicate the revised procedure to exporter customers and relevant branches.
Who it affects
AD Category-I banks, Exporters with outstanding export bills, Insurance companies regulated by IRDA, ECGC
Does this circular remove the 10% write-off limit mentioned in earlier circulars?
Yes, paragraph 3 explicitly states that the write-off under this facility will not be restricted to the 10% limit indicated in paragraph C 18(b) of A.P. (DIR Series) Circular No.12 dated September 9, 2000.
Can the claim amount in rupees be credited to the exporter's EEFC account?
No. Paragraph 4 clarifies that claims settled in rupees by ECGC or insurance companies should not be construed as export realisation in foreign exchange and should not be credited to an Exchange Earners' Foreign Currency Account.