ED probing 1,800 entities for possible FEMA rule breaches

The Enforcement Directorate is probing transactions totalling about Rs.11,700 crore by more than 1,800 entities holding accounts with branches of ICICI Bank for possible breaches of foreign exchange rules, according to sources at the nodal agency tasked with investigating Foreign Exchange Management Act (FEMA) violations.

Civil nature

The investigation relates to alleged unutilised export advances, pending bills of entry and outstanding export proceeds, according to the ED sources who did not wish to be identified. Offences under FEMA, if confirmed, are of a civil nature and may attract up to 300 per cent penalty. A total of 1,862 entities are currently under investigation. As per Reserve Bank of India guidelines, all authorised dealer banks are required to furnish particulars of the entities that have not complied with the necessary procedure of furnishing documents pertaining to bills of entry (proof of import), export advances (money received in advance in lieu of exports) and outstanding export proceeds on a quarterly basis.

“Typically, importers/exporters send or receive money as advance payment for transactions. These transactions are routed through banks in the country. Importers/exporters are supposed to submit documents providing evidence of the import/export of goods to the banks within the stipulated time, as per regulations,” an ICICI Bank spokesperson said in an e-mailed response to questions.

“ICICI Bank files returns regularly with the RBI for cases where documents are pending,” the spokesperson said, adding that a large portion of such transactions had already been regularised with customers having subsequently submitted the relevant documents. The ED sources said the probe had so far found that more than 27,000 entries pertained to unutilised export advances, while 2,100 entries were of pending bills of entry and about 1,200 records related to outstanding export proceeds. While preliminary scrutiny for collection and examination of documents had been initiated into all these entries, proper cases for further probe had been instituted in 53 instances and proposals made for closure of about a dozen inquiries.

Almost 40 per cent of the total entries being examined had already been regularised following submission of the necessary documentation and some of the accounts under the ED’s scanner pertained to public sector undertakings (PSUs), a banking industry source, who did not wish to be identified, said.

Suspect entries

The ED has asked for all necessary details of the suspect entries relating to bank accounts in Mumbai, Chennai, Ahmedabad, Bengaluru, Chandigarh, Kolkata, Hyderabad, Jaipur, Patna and Panaji, among other cities.

More than 6,500 instances of alleged breaches are being examined by the Mumbai zone and 15 formal inquiries involving Rs.4,000 crore had already been instituted till June.

22 inquiries

While 22 inquiries involving Rs.580 crore had been initiated in Kolkata, 27 others pertaining to Rs.342 crore had been started in Chandigarh, according to the ED sources. “The Bank is cooperating with the Enforcement Directorate by providing the required information,” the spokesperson said.

Export advances, pending bills of entry, outstanding export proceeds under the ED’s scanner