Slow place of knocking off entries in EDPMS could hurt pharma export shipments

Laxmi Yadav, MumbaiWednesday, May 16, 2018, 08:00 Hrs  [IST]

A large number of pharmaceutical exporters have expressed concern over the slow pace of clearing entries in Export Data Processing and Monitoring System (EDPMS) by banks. If entries remain uncleared by banks by September 30, 2018, exporters would land in Caution List thereby affecting their shipments, said a leading pharma exporter.

Export transactions are processed and reported through EDPMS system which integrates customs, SEZs, STPI and all authorised (AD) banks. EDPMS was introduced by Reserve Bank of India (RBI) in 2014 to facilitate ease of doing business. It is the responsibility of AD banks to knock off entries in EDPMS where payment has been realised so that customers do not face inconvenience of getting caution listed. The entries pertaining to promotional materials where payment is not expected can be marked off by banks following an undertaking by exporters.

As per RBI circular, an exporter gets caution listed, if shipping bill against him remains open for more than two years in EDPMS. Once export proceeds are realised and/or extension for realisation is granted, the exporter automatically gets de-caution listed.  

Caution-listed exporters are denied packing credit which in turn hamper their exports. Caution-listing also leads to non negotiation of ‘non-letter of credit bills’ (non-LC bills). As a result, though goods reach the buyer on time, they have to wait for banking documents. This leads to delays and huge demurrage charges that need to be cleared by the exporters.

Ever since the EDPMS system was introduced, most of the banks hardly paid attention to it. There has been significant discrepancy in the actual exports and exports realisation being shown on the EDPMS. Consequently, in March 2017 the RBI started issuing caution list of exporters for non-closure for export realisation, even through full export proceeds have been received.

Pharma industry body IDMA and export body FIEO approached RBI and commerce ministry seeking exemption from caution listing saying exporters cannot be held responsible for non closure of their entries in EDPMS, as it is banks responsibility to close it.  

Following this, RBI had exempted exporters from caution listing for three months and directed banks to close entries in EDPMS where export revenue was received. Due to human resource and technical constraints, banks could not complete it prompting exporters to approach RBI and commerce ministry again seeking extension of exemption from caution listing. The same was granted by RBI for six months and later it got extended by September 30, 2018.

Though banks started clearing export entries in EDPMS where payment was received, they are getting cleared at a snail's space in banks leading to piling up of entries.

Exporters fear if banks fail to clear entries within the stipulated timeline, they would not be de-caution listed thus hampering their export prospects.

A pharma exporter on condition of anonymity said, “Banks especially PSU banks are facing serious capacity and system constraints due to which they are unable to knock off entries in EDPMS in a timely manner. Hence we are facing the risk of being in the caution list.”

The implementation of EDPMS is aimed at facilitating ease of doing business. Spirit of RBI action is good but the way it has implemented is worrisome. RBI should have taken action against banks for not closing entries in EDPMS in a time bound manner rather than stopping export activities in absence of non closure of export entries, he added.

He said, “The apex bank should have examined the capacity of banks in addressing the issue before putting exporters in caution list. The action is so harsh and is devoid of merits, the entire export of an unit gets halted because its shipping bill appears opened in EDPMS due to promotional supplies which can not be monitized. RBI needs to take a practical approach.”

He added, “An exporter should not be under cautioned list because its transaction is not closed in EDPMS. An investigation needs to be done into it to make sure that exporters should not be wrongly included in the list.”

Exporters should not be penalised because of banks' inability to close entries in EDPMS. PSU banks have huge pendency as compared to private banks. SBI bank has pendency of 5.5 lakh transactions related to EDPMS.

Fifty per cent of pending cases in EPDMS are related to promotional supplies where no payment is expected. Such entries are required to be closed based on customers' undertaking. Despite exporters' undertaking, pendency of entries related to promotional supplies is huge as banks are unable to close them in a speedy manner.