FEMA
How does a marketplace seller end up on the RBI caution list?
Automatic caution-listing on overdue bills was withdrawn in 2020. What actually triggers listing now, what it blocks, and the de-caution route.
By Aaryan Kakani · · 16 min read
Does an overdue shipping bill caution-list you?
No. And the fact that most people believe otherwise is a hangover from a rule that was withdrawn six years ago. Until October 2020, caution-listing genuinely was automatic. Under paras 3(1)(i) and 3(1)(ii) of A.P. (DIR Series) Circular No. 74 dated May 26, 2016, an exporter with shipping bills open beyond two years was caution-listed by the system, and de-caution-listed by the system once the proceeds were realised or an extension granted. It was mechanical in both directions.
Both of those paragraphs were withdrawn by A.P. (DIR Series) Circular No. 03 dated October 09, 2020 , with the Reserve Bank stating in terms that the object was to make the system more exporter friendly and equitable. That single change reorganised the whole risk picture, and not in the direction sellers assume. The good news is that no threshold of overdue bills lists you. The bad news is that nothing lists you off automatically either. And the discretion that replaced the threshold sits with a human being at your bank.
| Mechanic | Before 09 October 2020 | From 09 October 2020 |
|---|---|---|
| Getting listed | Automatic where shipping bills remained open beyond two years | Only on the AD bank's recommendation to the RBI Regional Office, on track record |
| Getting off the list | Automatic on realisation of proceeds or grant of extension | Only on a fresh AD bank recommendation, as per the laid down procedure |
| Who decides | The system, from EDPMS data | Your AD bank, forming a view; the RBI, acting on it |
| What the exporter can influence | Only the number itself | The number, and how the bank reads your conduct around it |
| Handling of documents once listed | Restricted under para 3.2 of the 2016 circular | Unchanged. The 2020 circular expressly left the restrictions in place |
What actually triggers the recommendation?
Para 2 of the 2020 circular, now carried at para C.28(1) of Master Direction 16/2015-16 , is short and it is worth knowing by heart. An exporter is caution-listed by the Reserve Bank based on the recommendation of the AD bank concerned, depending on the exporter's track record with the AD bank and with the investigative agencies. The AD bank makes that recommendation to the Regional Office of the Foreign Exchange Department where the exporter has come to the adverse notice of the Enforcement Directorate, CBI, DRI or any other law enforcement agency, and/or is not traceable, and/or is not making sincere efforts to realise the export proceeds.
Three grounds, joined by "and/or", so any one of them is sufficient. For a marketplace seller running a legitimate shop out of a residential address with a real IEC and a real GSTIN, the first two are close to irrelevant. Nobody at the DRI is looking at a Rs 3,800 handicraft parcel to Rotterdam, and you are eminently traceable. The bank has your KYC, your address and your phone number. Everything therefore lands on the third ground, which is not a number at all. It is a characterisation of behaviour.
| Ground under para C.28(1) | What it means in practice | Realistic exposure for a marketplace seller |
|---|---|---|
| Adverse notice of ED / CBI / DRI or other law enforcement agency | An agency has taken formal notice of the exporter | Low. Ordinarily arises from misdeclaration or diversion, not from small-parcel e-commerce |
| Exporter not traceable | The bank cannot reach the exporter at all | Low, but it rises sharply if you move premises, change phone number or abandon the email on the bank record |
| Not making sincere efforts to realise export proceeds | A judgement the AD bank forms from the exporter's conduct on the outstanding bills | This is the one. Silence on bank letters plus a growing open-bill count is the whole exposure |
The bank is not deciding whether you owe money. It is deciding what kind of exporter you are. Every step above exists to make the second question answerable in your favour with paper you can produce today. </> } />
How do tiny bills become "insincere effort"?
Here is the mechanism, and it has nothing to do with intent. A marketplace seller files a shipping bill per parcel or per consolidated manifest, so a shop doing forty orders a week generates something in the order of two thousand shipping bills a year. The money for those orders does not arrive parcel by parcel. It arrives as a weekly or per-withdrawal settlement from a payment provider, netted of platform fees, spanning dozens of parcels at once. Nothing in that credit carries a shipping bill number.
So the money is realised and the bills are not closed. Those are two different events, and only one of them happens by itself. In EDPMS the entries stay open, aging quietly, and because each is worth a few thousand rupees no single one ever feels urgent enough to chase. Then a cohort of them crosses the nine-month line together (because they were shipped together) and the exporter appears on the bank's overdue report not with one problem but with four hundred. That optical shift, from a rounding error to a page of red, is usually what generates the first letter.
The second letter follows because the first went unanswered, and it went unanswered because the seller looked at four hundred line items, could not see how to begin, and put it aside. From the bank's side, that sequence is indistinguishable from an exporter who does not intend to realise. This is the entire pathway. It is described more fully in our guide on mapping one payout across many shipping bills , and the aging side of it in EDPMS reporting .
A home-textiles seller ships through a marketplace, files one shipping bill per parcel, and is paid by weekly settlement into a local bank account. In August the AD bank sends an overdue report: 412 shipping bills open past their realisation deadline, aggregate declared FOB USD 96,408. The seller has not replied to two earlier letters. Total realisation in the preceding calendar year was USD 781,000. </> } result={ <> Of USD 96,408 shown as outstanding, USD 91,200 had already been received and merely never lodged against the bills, leaving a genuine shortfall of
USD 5,208
. About 5.4% of the reported figure and roughly 0.67% of the year's realisation. Every one of the 412 bills is well under the Rs 10 lakh small-value line. The problem the bank is looking at is a lodgement backlog with a small tail, but the file in front of the bank does not say that, and until it does, the seller looks exactly like someone not making sincere efforts. </> } >
| Line | Working | Amount |
|---|---|---|
| Bills open past deadline | EDPMS pending list | 412 |
| Aggregate declared FOB | 412 × USD 234 avg | 96,408 |
| Received, not lodged | Settlement records tied back | − 91,200 |
| Genuine shortfall | 96,408 − 91,200 | 5,208 |
| Shortfall as % of reported | 5,208 / 96,408 | 5.4% |
| Self write-off headroom | 5% of USD 781,000 preceding calendar year | 39,050 |
| Shortfall against headroom | 5,208 / 39,050 | 13.3% |
The write-off headroom line is an illustration of scale, not an entitlement. Self write-off under Master Direction para C.23 is subject to the amount having been outstanding more than one year, documentary evidence of efforts to realise, the qualifying categories at para C.23.2(d), a Chartered Accountant certificate under para C.23.6 and surrender of proportionate export incentives under para C.23.5. Confirm the position for each bill with your AD bank.
What clock are you actually running against?
Master Direction para A.2(i) sets the period of realisation and repatriation of export proceeds at nine months from the date of export , and it says so for all exporters including SEZ units, Status Holder Exporters, EOUs, EHTPs, STPs and BTPs, until further notice. The statutory basis is Regulation 9(1) of FEMA Notification 23(R)/2015-RB , with Regulation 9(2)(a) applying the same nine months to the SEZ, Status Holder, EOU, EHTP, STP and BTP categories. There is no longer category for any of them.
The one place a longer period appears in the current Master Direction is para A.2(iii): for goods exported to a warehouse established outside India, the proceeds must be realised within fifteen months from the date of shipment. Note that this sub-para keys off date of shipment rather than date of export, and that Regulation 9(1)(a) adds the RBI's permission for the warehouse as a condition. A fourth limb, para A.2(iv), inserted by A.P. (DIR Series) Circular No. 03 dated April 23, 2025, lets AD banks allow nine months from the date of sale for goods exported to Bharat Mart.
| Case | Period | Runs from | Provision |
|---|---|---|---|
| All exporters, including SEZ units, EOUs, EHTPs, STPs, BTPs and Status Holders | Nine months | Date of export | MD para A.2(i); FEMA 23(R) Reg. 9(1) and 9(2)(a) |
| Goods exported to a warehouse established outside India | Fifteen months | Date of shipment | MD para A.2(iii); FEMA 23(R) Reg. 9(1)(a) |
| Goods exported to Bharat Mart | Nine months | Date of sale from the warehouse | MD para A.2(iv), inserted 23 April 2025 |
| Exports made between 14 Nov 2025 and 4 Jun 2026 | Fifteen months, then restored to nine | Per the substituting notifications | FEMA 23(R)/(7)/2025-RB dated 13.11.2025; FEMA 23(R)/(8)/2026-RB dated 05.06.2026 |
| Exports on or after 1 October 2026 | Fifteen months; eighteen if invoiced or settled in INR | Date of shipment for goods | FEMA 23(R)/2026-RB, Reg. 5(1)(a) and first proviso |
There is one further wrinkle worth naming because it decides whether a bill is overdue at all. "Date of export" is not defined for goods anywhere in FEMA 23(R) or in the Master Direction. The only Explanation to Regulation 9 defines it for software, as the date of the invoice. Wherever the RBI has had to make the clock operational for goods, it has used the date of shipment: para A.2(iii) does, and para C.28(2)(a)(ii) requires usance bills of caution-listed exporters to mature within the prescribed realisation period reckoned from date of shipment. From 1 October 2026 the 2026 Regulations drop the phrase for goods entirely and run the period from the date of shipment. We work through the consequences in when the nine-month clock actually starts .
What does caution-listing actually block?
The 2020 circular changed how you get listed. It expressly did not change what happens once you are. Those consequences sit at para C.28(2) of the Master Direction, and for an e-commerce seller they are close to terminal, because the business model depends on shipping first and being paid afterwards.
The AD bank first intimates the exporter of the caution listing with details of the outstanding shipping bills. After that, when a caution-listed exporter submits shipping documents for negotiation, purchase, discount or collection, the AD bank may accept them only on one of two conditions: the exporter produces evidence of having received advance payment or an irrevocable letter of credit in its favour covering the full value of the proposed exports; or, in the case of usance bills, the letter of credit covers full export value, permits such drawings, and the usance bills mature within the prescribed realisation period reckoned from date of shipment. Except under those two conditions, AD banks should not handle the shipping documents of a caution-listed exporter at all.
| What closes | Provision | Why it hurts a marketplace seller |
|---|---|---|
| Handling of export documents without advance payment or a full-value irrevocable L/C | MD C.28(2)(a) | Consumer buyers do not open letters of credit. There is no version of a marketplace order that satisfies this |
| Issue of guarantees by the AD bank | MD C.28(2)(b) | Requires prior RBI approval, adding a regulator to routine banking |
| Approval of reduction in invoice value | MD C.17(i)(c) | Removes the ordinary remedy for the fee-and-refund shortfalls a marketplace produces every week |
| Remittance of export claims | MD C.22(i) | Blocks settlement of legitimate buyer claims while listed |
| Long-term export advance up to ten years | MD C.2(2)(iii) | Available only to entities that have not come under adverse notice and have not been caution listed |
There is a separate restriction worth knowing because it operates independently of the caution list and bites earlier. Where export proceeds remain unrealised beyond one year from the due date of realisation or the extended period, the exporter shall undertake further exports only against receipt of full advance or an irrevocable letter of credit. That rule is carried forward as Regulation 13 of the 2026 Regulations. It reaches the same commercial outcome as caution-listing without anyone recommending anything, which is why the one-year mark past the due date matters as much as the nine-month mark itself.
How do you close small bills before it gets there?
The good news for a marketplace seller is that the rulebook already contains a route built for exactly this shape of problem. Master Direction para C.31, the special procedure for EDPMS reconciliation, applies notwithstanding anything else in the Master Direction, to entries of value equivalent to Rs 10 lakh per entry or bill or less. Under it, entries are reconciled and closed based on a declaration by the exporter that the amount has been realised; any reduction in declared or invoice value of the shipping bills is also accepted on the exporter's declaration; and the declarations may be given quarterly in consolidated form combining several bills for bulk reconciliation and closure.
Read that last clause again, because it is the one that makes four hundred open bills tractable. You are not required to build a per-parcel payment trail. You are permitted to close them in bulk, quarterly, on declaration. The same paragraph also directs AD banks to review charges on such small-value transactions and states that they shall not levy penal charges for delays in adherence to regulatory guidelines. From 1 October 2026 this relaxation moves into the Regulations themselves, at Regulation 4(2) and the proviso to Regulation 6 of the 2026 Regulations. Our guide to EDPMS entries under Rs 10 lakh works through the mechanics.
| Route | Limit | Key conditions | Provision |
|---|---|---|---|
| Small-value declaration closure | Rs 10 lakh per entry or bill | Exporter declaration; quarterly consolidated declarations permitted for bulk closure | MD C.31 |
| Reduction in invoice value | 25% of invoice value | Not a floor-price commodity; exporter not on the caution list; proportionate incentives surrendered | MD C.17(i) |
| Reduction, exporter in business over three years | No ceiling | Same conditions, plus outstandings not exceeding 5% of average annual realisation of the preceding three financial years | MD C.17(ii) |
| Self write-off, exporter other than Status Holder | 5% | Outstanding over one year; qualifying category; CA certificate; incentives surrendered | MD C.23.1, C.23.2, C.23.5, C.23.6 |
| Self write-off, Status Holder Exporter | 10% | Same conditions; limits reckoned cumulatively with AD bank write-off | MD C.23.1, C.23.2 |
| Write-off by AD Category-I bank | 10% | Regular customer at least 6 months, fully KYC and AML compliant, AD satisfied with bonafides | MD C.23.1, C.23.2(c) |
| Write-off on a settled credit insurance claim | Not restricted to 10% | Documentary evidence from ECGC or an IRDA-regulated insurer that the claim is settled; rupee claims are not export realisation | MD C.24 |
All three write-off percentages share the same base, and it is a base people get wrong: total export proceeds realised during the calendar year preceding the year in which the write-off is being done, not the financial year. The self and AD-bank limits are reckoned cumulatively. Para C.23.3 also allows the AD bank to write off without any limit in three specific situations. Buyer declared insolvent with an official liquidator's certificate; a balance settled through the Indian Embassy, a Foreign Chamber of Commerce or a similar organisation; and goods auctioned or destroyed by the Port, Customs or Health authorities of the importing country. Provided the AD is satisfied with the documentary evidence.
How do you get de-caution-listed?
Through the same bank that recommended the listing. Para 3 of the 2020 circular states that the AD bank would also make recommendations to the Regional Office of the Reserve Bank for de-caution-listing an exporter as per the laid down procedure. That is the whole published mechanism, and the important word in it is "recommendations". Since the automatic de-listing on realisation was withdrawn along with the automatic listing, realising the outstanding proceeds no longer lifts the listing by itself. It removes the reason for the listing. Someone still has to act on that.
This is why the practical advice for a caution-listed exporter is unglamorous and relational rather than legal. You are not appealing to the Reserve Bank. You are asking a specific AD bank, which has already formed and communicated an adverse view of your conduct, to write a second letter reversing it. What persuades that bank is a closed file: outstanding entries reconciled, the small-value declarations filed, the residue either realised, reduced or written-off through a documented route, and a record of responsive correspondence throughout. The exact document set and current procedure vary in practice. Confirm both with your AD bank before you start assembling anything.
One structural caution about timing. Master Direction 16/2015-16 remains the operative Master Direction, updated as on July 17, 2026, but the notified text of the 2026 Regulations contains no caution-listing provision, no write-off provision and no exemption list equivalent to Regulation 4 of the 2015 Regulations. A revised Master Direction is implied but had not been published as at the date of writing. If you are in the middle of a de-caution process across the October 2026 boundary, keep asking your AD bank whether the procedure it quoted you still stands.
If the pressure you are facing is coming from the trade side rather than the banking side, the pattern is similar but the counterparty is different. See our guide on responding to a DGFT show cause notice , and on answering an export realisation pending letter .
Caution-list prevention and recovery checklist
The first block keeps you off the list. The second is what you do the week a letter arrives. The third applies only if a listing has already happened.
Ongoing. Staying off the list
- Every shipping bill tracked against its own realisation deadline from its own date of shipment, not as a single portfolio deadline
- Each settlement from your payment provider lodged with the AD bank and apportioned across the shipping bills it covers, in the month it is received
- Small-value entries at Rs 10 lakh or less identified and closed quarterly on consolidated declaration under Master Direction para C.31
- Bank contact details (address, phone, email) kept current, so the "not traceable" ground never opens
The week a bank letter arrives
- A dated written acknowledgement sent within the week, stating what you have identified and what you will do by when, even before the work is finished
- The full EDPMS pending list pulled and split into three buckets: received but not lodged, genuinely short, and disputed or refunded
- Realisation documents assembled per provider. The weekly or per-transaction FIRA plus the underlying settlement statements
- The residue after lodgement quantified as a number, so the bank is looking at a bounded problem rather than an open one
If a listing has already happened
- The intimation from the AD bank obtained, with the details of outstanding shipping bills it is required to carry under para C.28(2)
- The bank's own de-caution-listing document requirements requested in writing, since the laid down procedure is not published
- Every closable entry closed. Realised, reduced under para C.17 where available, or written off through a documented route under paras C.23 or C.24
- The applicable realisation period confirmed per cohort of bills, given the November 2025 to June 2026 window and the 1 October 2026 change of Regulations
Frequently asked questions
Do overdue shipping bills automatically put me on the RBI caution list?
No. A.P. (DIR Series) Circular No. 03 dated October 09, 2020 withdrew paras 3(1)(i) and 3(1)(ii) of A.P. (DIR Series) Circular No. 74 dated May 26, 2016, abolishing both automatic caution-listing on shipping bills open beyond two years and automatic de-caution-listing on realisation, expressly to make the system more exporter friendly and equitable. Today an exporter is caution-listed only on the recommendation of the AD bank concerned, depending on track record with that bank and with the investigative agencies. Overdue bills on their own are not a trigger. They are the evidence base from which a bank forms a view that an exporter is not making sincere efforts, which is.
What are the three grounds on which an AD bank recommends caution-listing?
Under para 2 of the 2020 circular, now para C.28(1) of Master Direction 16/2015-16, the AD bank recommends to the Regional Office of the Foreign Exchange Department where the exporter has come to the adverse notice of the Enforcement Directorate, CBI, DRI or any other law enforcement agency, and/or is not traceable, and/or is not making sincere efforts to realise the export proceeds. A marketplace seller almost never trips the first and rarely the second. The third is the live one, and it is a judgement about conduct rather than a threshold computed from a balance.
What happens to my exports once I am caution-listed?
Master Direction para C.28(2) requires the AD bank to intimate you of the listing with details of the outstanding shipping bills. From then on, when you submit shipping documents for negotiation, purchase, discount or collection, the bank may accept them only if you produce evidence of advance payment or an irrevocable letter of credit in your favour covering the full value of the proposed exports; or, for usance bills, where the letter of credit covers full export value, permits such drawings, and the bills mature within the prescribed realisation period reckoned from date of shipment. Except on those two conditions, AD banks should not handle your documents at all, and any guarantee for you needs prior RBI approval.
How do I get de-caution-listed once the money has been realised?
Not automatically. Para 3 of the 2020 circular states that the AD bank would also make recommendations to the Regional Office of the Reserve Bank for de-caution-listing an exporter as per the laid down procedure. Realisation removes the reason for the listing; it does not lift it. The route runs back through the same AD bank that recommended the listing, so the relationship to repair first is the banking one. The laid down procedure is not published in the circular, so confirm the current document set with your AD bank before assembling anything.
What is the realisation period a marketplace seller is actually working against?
Master Direction para A.2(i) sets it at nine months from the date of export for all exporters including SEZ units, Status Holder Exporters, EOUs, EHTPs, STPs and BTPs, on the statutory basis of Regulation 9(1) and 9(2)(a) of FEMA 23(R)/2015-RB. The only different period in the current Master Direction is fifteen months from the date of shipment for goods exported to a warehouse established outside India, under para A.2(iii). Two moving parts matter: exports between 14 November 2025 and 4 June 2026 sat under a temporary fifteen-month substitution, and the 2026 Regulations come into force on 1 October 2026 with a different period again. Confirm which regime your oldest open bills fall under with your AD bank before computing a deadline.
Sources
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Update history
- First published.