In an increasingly connected world, banking and trade institutions are searching for innovations to boost operational efficiencies and go-to-market capabilities, drive new markets, and gain competitive advantage. From elevating global digital maturity and reshaping trade management through blockchain to streamlining back operations, the motive is clear – enhance customer experience and maximize profitability.

To alleviate the hiccups bankers and exporters face, the Ministry of Commerce commenced the pilot launch of the revamped electronic bank realization certificate (eBRC) system on November 15, 2023. Banks will issue the eBRC as a digital certificate to substantiate payment proof, confirming the receipt of payment by the exporter from a foreign buyer for the exported goods and services. Exporters can access various advantages and incentives outlined in the Foreign Trade Policy.

Furthermore, it validates the repatriation of export proceeds to the country and ensures adherence to foreign exchange rules. The soft launch of the upgraded eBRC system is touted as an important precedent of the Indian government’s new foreign trade policy, marking a move from incentives to remission and an entitlement-based regime.

What’s the current process?

Heretofore, customers or exporters have had to submit their requisite export documents to the bank. Then, the bank reported the realization to the Directorate General of Foreign Trade (DGFT). Post verification and authentication, exporters received their incentives.

From exporters informing banks of the value of their goods intended for export & diverse transaction entries to the DGFT audits – the management lifecycle has been laborious, time-consuming, and paper-intensive.

The revamped system aims to help exporters and banks optimize their resources and enhance efficiency cost-effectively.

Realizing the impact of eBRC

Over the years, DGFT has significantly automated its operations. The enhanced system will further reinforce trade facilitation by enabling banks to transmit electronic Inward Remittance Messages (IRMs) directly to DGFT. Exporters, in turn, will self-certify their eBRCs based on the received IRMs. Only the Importer-Exporter Code (IEC) holders can access relevant IRM details, which can be matched with relevant shipping bills, SOFTEX (bills for software exporters), service export, deemed export, or invoice details. The eBRCs can be generated for outbound shipment of goods, services, and deemed exports. With this latest advancement, exporters can truly focus on boosting exports, aligning with the ambitious national target of reaching USD 2 trillion in exports by 2030.

What has changed for Banks?

Information symmetry: Under the revised scope, proper inward remittance messages (IRM) and outward remittance messages (ORM) will be reported through structured data sets. Banks will integrate IRM and ORM into the DGFT system in real-time. Exporters can map their bills on the DGFT system against listed IRMs reported by the bank and generate self-declared eBRC. The data will be generated as XML files. However, banks will have all-access to eBRCs corresponding to their IRM inputs, and can flag any eBRC for further inquiry or any other request.

Legacy transformation: Starting from the launch date (as mentioned above), each bank will set its own cut-off date to determine readiness after completing User Acceptance Testing (UAT). This window period will enable banks to upgrade their infrastructure and networks while clearing their backlogs. They can continue traditional BRC filing processes with DGFT before the cut-off date.

Elevated operations: After the cut-off date, banks must have their process optimization, user acceptance, and maturity realization in place. All banks must mandatorily integrate IRM and ORM data using an Application Programming Interface (API) with DGFT to ensure seamless and responsive information exchange. All legacy and upgraded eBRC systems will operate concurrently until the complete operational transition to advanced eBRC by January 31, 2024.

What has changed for Exporters?

Digitalized process: Exporters can access a user-friendly business environment through web-based solutions. They can log in to the DGFT website, link their PAN, and fill in other requisite details such as the bank IFSC code, the shipping bill number, and the transaction date.

Centralized view: The interactive dashboard’s repositories section allows exporters to gain a centralized view of all IR/OR records submitted within a particular time range.

Easy documentation: Exporters can map shipping details in DGFT through digital records for self-attestation and submission for incentives through the new eBRC systems. Additionally, they can maintain and retrieve records for audit and compliance, eliminating multiple visits to banks and DGFT offices.

Although the new system simplifies the otherwise time-consuming trade documentation processes, the road to complete digital transformation is not without its challenges.

What are the prevalent challenges while transitioning to eBRC regularization?

While transitioning to the modernized infrastructure and enhanced regulatory frameworks, bankers and exporters face numerous challenges, from payment reconciliation issues to suspicious transactions and compliance hurdles.

Challenges faced by Banks:

Payment reconciliation issues: Diverse data formats, procedures, and internal hassles can give rise to various reconciliation issues. For instance, when the exporter’s bank processes a Shipping Bill (SB) or SOFTEX, but payment is received in a different bank, the receiving bank issues an electronic Foreign Inward Remittance Certificate (eFIRC) upon the exporter’s request. This eFIRC is crucial for the exporter’s bank to finalize the Shipping Bill before generating the eBRC on the DGFT portal. This may give rise to uncertainties and payment reconciliation issues in the proposed DGFT process, especially if exporters are delayed in submitting the required documents.

Manual and cost-intensive operations: Banks juggling legacy and upgraded systems would face significant operational hurdles ranging from data asymmetry to customer non-cooperation. For instance, the procedural guidelines mandate Authorized Dealer (AD) banks to issue eBRC on the DGFT platform upon the closure of SBs/SOFTEX in the Export Data Processing and Monitoring System (EDPMS). The proposed process allows exporters to self-generate eBRCs on the DGFT portal before closing SBs/SOFTEX in EDPMS. However, exporters who are hesitant, non-responsive, non-cooperative, or non-traceable in submitting relevant documents to their AD banks within the prescribed timeline could cause a backlog of outstanding entries in EDPMS, further presenting inaccurate economic data to AD banks – even though Forex has been received. The eBRC data alone is insufficient for bank transaction processing, as supporting documents and compliance checks must occur, and any discrepancies must be resolved before bill booking and realization.

Gaps in IR/OR certificate delivery: Banks can view, download, and audit eBRC data in real-time and raise a query against the eBRC generated. However, if they encounter Directorate of Enforcement referred cases or Caution Listed exporters, an established workflow and a risk-based management system for post-issuance audit must be in place. This will be an additional SOP for banks to follow. Subsequently, exporters must act on flagged eBRC within a standard time limit. The eBRC, once flagged, shall not be available for any incentives/declarations to Govt. Even though such cases are available in EDPMS for the AD bank’s perusal while processing shipping bills/SOFTEX regularization, there needs to be more clarity on how such instances of ED-referred or referring cases would be handled at DGFT.

Challenges faced by Exporters:

Managing disparate systems: Exporters must follow varying datasets, formats, and procedures between banks and DGFT. The problem compounds if the exporters are multiple account holders. For instance, they must identify how they will handle different business scenarios where the shipping bill is mapped to one bank and possibly submitted to another. While some other bank might process the remittance. This may lead to discrepancies in identifying the bank responsible for ‘information utility’ and, ultimately, issuance of eBRC.

Export advance reconciliation issues: In the case of foreign inward remittances designated as export advances, exporters often lack Shipping Bill details. AD banks create IRMs upon exporter request with the purpose code ‘Export Advance.’ As per DGFT’s proposal, all such IRMs awaiting eBRC issuance must be duly reported. Subsequently, when AD banks generate SBs for advance payments, exporters can link SBs to respective IRMs and generate eBRCs. However, the SB may remain open if exporters do not provide documentation to the AD bank. Challenges arise when the AD code quoted by exporters is from a bank with which they no longer have a relationship. The proposed solution suggests routing documents and SBs through the same bank, contrary to standard practice. Exporters may disagree, especially considering potential validation issues at the bank AD code level, leading to more failures.

Lack of integrated systems: Lack of tech integration and process gaps could lead to manual and cost-intensive reconciliations for exporters. For instance, there is a need for due diligence in dispensing hard copies of shipping bills for the negotiation of export documents to bankers. Exporters are also concerned about sharing details of third-party/third-country payments that they are mostly unaware of at the time of realization. Their inability to declare the same during shipment results in transaction reporting gaps and delays in fund flows.

The road ahead for Banks and Exporters

Banks and exporters can level up their operations and expedite the issuance of proof of inward remittances by partnering with the right tech enablers. Leveraging AI/ML technologies, both parties can avail real-time data reporting, management, and dissemination. At the same time, data analytics can be instrumental in monitoring supervised firm-specific risks, including liquidity, market, credit exposures, and shipping risks.

Exporters must look beyond DGFT information and develop new reconciliation systems to maintain seamless information exchange and follow-up. This will enable them to reduce transaction time and costs. On the other hand, banks can benefit from centralized reconciliation platforms powered by enhanced eBRC systems – simplifying the reconciliation of IRMs with shipping bills, SOFTEX, invoices, etc., and promoting ease of business.

At HTC, we believe in bolstering the trade value chain through a one-stop, ready-to-use solution that can cater to customers’ and banks’ perspectives and adhere to DGFT and RBI regulatory compliance. HTC has 10+ years of expertise in providing and managing end-to-end solutions related to trade finance, which can help banks and customers elevate long-term performance.

As a strategic partner, we can empower customers and banks to overcome their current challenges by leveraging superior digitalization and automation capabilities. Banks and exporters can utilize our SaaS/ on-premises solution offering to monitor and manage foreign exchange reserves and tax filings while ensuring enhanced transparency and accountability, as well as future integration and reconciliation aspects proposed by DGFT to ensure seamless efficiency.