Banking Concerns Holding Back Progress Of E-Commerce Exports

New Delhi, Sept 19 (KNN) Reluctance to process forex received through alternate channels and high processing fees are some of the banking issues hindering growth of exports through e-commerce, a report by think tank GTRI said on Monday.

The reported suggested that there is a need to bring mindset change to unlock the sector's potential.

Unlocking India's e-commerce export potential to USD 350 billion by 2030 requires addressing banking issues that hinder growth and increase operational costs, the Global Trade Research Initiative (GTRI) said. 

“To initiate change, both the RBI and banks must shift their mindset towards treating small-value exports differently from larger ones. This shift is essential to prevent misuse while streamlining processes. Without this fundamental change, any reforms attempted by the RBI and banks will fall short,” it said. 

Small e-commerce businesses often face challenges because banks are not equipped to handle low-value transactions efficiently, it added. 

The key issues include reluctance to process forex through alternate channels, high processing fees, incorrect purpose code allocation, and limitations in the RBI's EDPMS (Export Data Processing and Monitoring System). 

The Reserve Bank of India tracks export payments and reconciliation through its Export Data Processing and Monitoring System. 

“Banks are happy to process forex received through bank transfers but reluctant to process forex received through foreign currency cheques, payment gateways like PayPal, credit cards, Western Union, cash receipt when a buyer selects item live in the retail shop,” it said. 

Banks delay crediting forex received in a firm's account when payments are received through such channels, and this affects cash flow and hampers business operations, the report noted. 

Banks charge money multiple times at different stages for the same small-value shipment, it added. 

Elaborating this, it said that essential charges include charges for submitting shipping bills (Rs 80 to Rs 2,000) at the time of forex realisation (1-to-2.5 per cent of value), intermediary bank charges during forex transfers (USD 10 to USD 55 per transaction), penalties for bills pending at EDPMS (Rs 100 per shipping bill per month).

“Most charges are fixed for a transaction irrespective of value. Bank charges can exceed 50-60 per cent of the shipment value. This makes e-commerce exports commercially unviable,” it said, adding banks allocate purpose codes for each remittance but frequently issue incorrect codes.  (KNN Bureau)