Export bills (in respect of goods) sent on collection
Understand RBI FEMA regulations for receiving inward remittances on exported goods sent for collection. Learn eligibility, key documents, compliance steps, and seamless application for exporters and banks handling bill collections.
Quick summary
| Field | Details |
|---|---|
| Code | P0105 |
| Category | Trade Credit |
| Applicable For | Exporters and Authorized Banks |
| Transaction Direction | Inward |
| Primary Use | Collection proceeds from exported goods bills |
What is Purpose Code P0105?
Purpose Code P0105 is used when an Indian exporter or a bank receives inward remittances for export bills (in respect of goods) sent on collection basis. This includes proceeds from goods exported where bills are forwarded abroad for collection from overseas buyers. As per the FEMA regulations, this purpose code classifies funds repatriated after the foreign buyer honors the bill. This ensures exporters comply with RBI’s timeline while differentiating it from outright payments or collected advances. This code promotes transparency in export finance and helps to track trade credits and bill collections separately.
When to use P0105 Purpose Code?
This Purpose Code should be used only where the transaction fits its defined regulatory scope. Here's when you should and shouldn't use this code:
You should use this code when:
- Proceeds from export bills sent on collection - Includes realization of payments for goods exported via documentary bill collection.
- Inward remittance of collected export bills - Includes funds repatriated by overseas collecting banks after buyer payment.
- Repatriation of export proceeds via collection - Includes FEMA-compliant inward flows for collected bills on goods.
Do not use this code when:
- Export bills negotiated under usage or sight LCs.
- Advance payments for exports.
- Direct wire transfers without bill collection process.
Importance of Purpose Codes
RBI purpose codes are mandatory under FEMA to classify the nature of cross-border transactions entering or leaving India. They allow banks and regulators to accurately track foreign exchange flows and apply the correct regulatory, tax, and reporting treatment.
For individuals, businesses and institutions, correct purpose code usage:
- Ensures transactions are classified correctly under FEMA.
- Enables accurate reporting to the RBI and other regulators.
- Reduces delays caused by compliance checks or misclassification.
- Supports clean audit trails and tax reconciliation.
Bottom-line:
Using the correct purpose code helps ensure smooth processing, regulatory compliance, and faster credit of funds.
How to apply Purpose Code P0105?
- Select P0105 – Export bills (in respect of goods) sent on collection when initiating the inward remittance
- Provide export documentation like bill of exchange, shipping docs, and collection advice.
- Submit Invoice of Export (EDF/SDF form) and FEMA declaration.
- Complete exporter/bank KYC and AD Category-I bank verification.
- Bank processes after confirming collection realization.
Additional Notes:
- Exclusively for goods exports under collection.
- AD banks handle reporting under ‘Master Direction on Export of Goods/Services’.
Documents required for P0105 Purpose Code
| Document | Purpose |
|---|---|
| Bill of Exchange (Draft) | Confirms collection instrument sent abroad |
| Advice of Remittance from Overseas Bank | Validates proceeds realisation |
| Bill of Lading/Airway Bill | RProof of goods shipment |
| Commercial Invoice & Packing List | Details export transaction |
| FEMA Self-Declaration/EDF | Regulatory compliance |
Common mistakes to avoid
- Using a generic or incorrect purpose code instead of the exact RBI-prescribed purpose code can lead to misclassification of the transaction under FEMA and trigger additional compliance checks by the bank.
- Mismatch between purpose code, invoice, and remittance narration may place the transaction on hold until clarification is provided.
- Submitting unclear or incomplete supporting documents that do not clearly describe the nature of the transaction often result in delays, as banks rely on documentation to validate FEMA compliance.
- Missing mandatory PAN or incomplete KYC documentation can prevent banks from releasing funds until verification is completed.
- Using service-related purpose codes for non-service transactions like capital receipts, investments, gifts, or refunds can result in incorrect regulatory treatment and potential reporting issues.
- Assuming small or recurring transactions do not require accuracy and repeated misclassification can attract regulatory scrutiny over time.
How Xflow supports compliant inward remittances
Cross-border payments require accurate purpose code selection and complete compliance documentation. Xflow helps businesses and individuals receive international payments while staying aligned with RBI and FEMA requirements.
With Xflow, you can:
- Select the correct purpose code with clarity
- Organize and maintain supporting documents
- Reduce compliance back-and-forth with banks
- Support FEMA compliant inward remittances
Frequently asked questions
If you use an incorrect Purpose Code for your transactions, you might face cancellations or delays in your payments. Along with that, there are several compliance issues as well that may lead to penalties.
To select the right purpose, consult the purpose code list provided by RBI and make sure that you match your transaction type with the most relevant code. Additionally, to ensure that there are no errors, you can seek professional advice from a reliable banking partner or financial advisor.
In cases you’ve used the wrong Purpose Code for your international transaction, it’s important to act quickly. You must consult your bank or payment service provider as soon as possible to request a correction.
Eligibility depends on the specific transaction type defined by the RBI. Certain codes apply to individuals, others to businesses, and some may apply to both.
