WRONG HEAD OF foreign remittance.

This query is : Resolved

seema shewale (Querist)
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09 February 2022 Hi

I have received foreign remittance wrongly under head of donations and gifts . actual remittance is against export. The buyer wrongly mentioned payment under wrong head donation and gifts. how can it solved. As buyer can not recall the said amount by bank.
what options are available for the said transactions (bank is not reversing amount as they are saying it will be against RBI norms )

Asha Kanta Sharma online

Asha Kanta Sharma

(Expert)
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11 July 2024 If you have received foreign remittance incorrectly labeled as donations and gifts when it should have been categorized under export proceeds, here are steps you can consider to rectify the situation:

### 1. Communication with Buyer

- **Contact the Buyer**: Reach out to the buyer who made the remittance and explain the error. Provide evidence such as invoices, shipping documents, and any other relevant documentation to support your claim that the remittance is for export proceeds, not donations or gifts.

- **Request Correct Payment Instructions**: Ask the buyer to instruct their bank to reclassify the payment under the correct purpose (export proceeds) and provide a letter or communication confirming the correct nature of the payment.

### 2. Bank Communication

- **Provide Documentation**: Submit all relevant documents to your bank that clearly demonstrate the nature of the transaction as export proceeds. This may include export invoices, shipping documents, contract copies, and communication with the buyer.

- **Request Bank to Correct**: Request your bank to process the correction based on the documentation provided. Banks have procedures to handle misclassified payments, especially when supported by appropriate evidence.

### 3. Compliance with RBI Regulations

- **Compliance Considerations**: Understand and ensure compliance with RBI regulations regarding foreign remittances. If the bank is hesitant to reverse the transaction due to regulatory concerns, seek clarification from them on the specific regulations they are citing.

- **Seek RBI Clarification**: Contact the Reserve Bank of India (RBI) directly or check their guidelines to confirm the correct procedure for reclassification of misclassified remittances. Sometimes, banks may misinterpret regulations, and direct guidance from RBI can clarify the correct course of action.

### 4. Legal and Professional Advice

- **Legal Consultation**: If the issue persists and the bank and buyer are unable to resolve the matter, consider consulting with a legal professional who specializes in international trade or banking laws. They can provide legal advice and potentially assist in resolving the issue through legal channels.

### 5. Persistence and Follow-Up

- **Persistence**: Follow up regularly with both the buyer and your bank to expedite the resolution process. Clearly communicate the urgency of correcting the misclassification to minimize any financial or operational impacts on your business.

### Conclusion

Rectifying a misclassified foreign remittance requires clear communication with both the buyer and your bank, supported by documentation that proves the correct nature of the transaction (export proceeds). While banks may initially cite regulatory constraints, providing proper documentation and persistently following up should facilitate the correction. If necessary, seek professional advice to navigate any legal or regulatory complexities.

I hope this guidance helps in resolving the issue promptly. If you have further questions or need clarification on specific steps, feel free to ask.