What is the role of BRC in cross-border payments

Introduction

Cross-border trade can be complex enough without the paperwork. Crossing the t’s and dotting the i’s are an essential part of the housekeeping involved in running an export business, and if neglected, can lead to hefty fines. In India, trade and commerce is overseen and regulated by the Director General of Foreign Trade (DGFT) and the Reserve Bank of India (RBI), both of whom mandate that companies engaging in exports regularly apply for certain certifications and documents to stay compliant with Indian law.

One key document in this process is the Foreign Inward Remittance Advice (FIRA). The purpose of the FIRA is quite straightforward. It proves that an individual or business has received payment in foreign currency. There is one more important document in the mix: the Bank Realization Certificate (BRC), which is mandated by the DGFT and issued by the exporter’s banking partner.

Essentially, the FIRA serves as confirmation from your banking partner that the funds from an overseas transaction have been successfully credited to your account. At Xflow, we have simplified the process of getting eFIRA down to one click. What once took repeated follow ups is now available automatically, ensuring businesses can access their eFIRA instantly and without hassle.

However, the process of getting a BRC requires a little more work. In this article, we will cover what the BRC is, why it is important, what benefits it can offer, and how to secure it.

What is BRC and eBRC?

At first glance, BRC and FIRA have something in common. Both are certificates that indicate that the exporter has received some payment in foreign currency. However, BRC goes a step further by confirming that the payment corresponds to an actual export of goods or services. Your banking partner issues the BRC after cross verifying the payment received with the details of the exported goods or services as detailed in other supporting documents such as the shipping bill.

Information contained in FIRA	Information contained in BRC
The total amount received	Exporter’s business details
Cross-border payments received in foreign currencies such as USD, GBP, SGD, and so on	Sender’s details and shipping bill details
The applied exchange rate	Bank name file number and upload date
Sender's details and the purpose of payments	Bank realization certificate (BRC) number and the date of realization of money by bank
-	Realized value in foreign currency and currency of realization

By verifying that the cross-border payment is consistent with the goods, the banking partner ensures that a company is compliant with the RBI guidelines, which mandate that the value of goods exported by any Indian company must be ‘realized’ (i.e ‘paid in full’ or compensated for) and repatriated to the country within a certain stipulated time period. The time period itself depends on the nature of the export, but this regulation ensures that every export is accounted for.

In the past, the process of getting a BRC used to be tedious and complicated. Exporters had to visit their bank, apply for a physical BRC, and then submit it to the DGFT, who would then manually enter transaction details. In 2012, the Government of India digitized the process. Now it is possible to obtain an electronic Bank Realization Certificate (eBRC), which serves the same purpose, while eliminating the need for physical visits and paperwork.

Is BRC mandatory for exporters?

Yes, the BRC is an important document for exporters as it establishes proof of payment for exports. By ensuring that foreign exchange earned through exports has been received and recorded, it helps government agencies like the RBI establish regulatory oversight. This helps them carry out some of their main functions:

Monitoring & regulating exports: By collecting information on the inflow of foreign exchange, the RBI can maintain the stability of the currency, keep track of economic trends, and manage the country’s balance of payments.
Maintaining transparency: By keeping track of the activities of various businesses and individuals, the RBI ensures they align with tax and trade regulations, and ensures accountability in financial transactions.
Preventing unlawful activities: By having access to detailed export data, the RBI can detect and nip unlawful activities like smuggling, creation of black markets, and money laundering in the bud.

Why should exporters claim BRC?

There are numerous benefits to obtaining BRC for exporters. These range from direct monetary benefits like discounts on taxes and duties, to more intangible, but equally important benefits like financial credibility. Here’s a quick overview of the key benefits of being up-to-date with your eBRCs:

Financial incentives and refunds: The government has introduced a number of incentives to promote exports in India. The BRC is a mandatory prerequisite for availing these schemes, such as Duty Drawback Scheme, Export Promotion Capital Goods (EPCG) Scheme, Merchandise Exports from India Scheme (MEIS), Service Exports from India Scheme (SEIS), Advanced Authorization Scheme and more. All these schemes allow exporters to claim refunds on duties like customs duty, export duty, service tax, GST and so on, which reduces manufacturing costs and helps exporters offer their product at more competitive prices in the global market.
Compliance with regulations: Obtaining eBRC ensures that exporters comply with FEMA and other export regulations. This is important because non-compliance with these regulations can lead to hefty fines.
Financial credibility: Regular compliance with DGFT guidelines, and having all your documents in order boosts the financial credibility of your firm, which makes getting business loans and financial assistance much easier.
Enhanced transparency: Applying for BRC regularly allows for accurate financial record keeping, boosts the transparency of export transactions, and helps in preventing fraud and discrepancies.
Ease of audits: As a firm grows, it is likely that government agencies and financial institutions will want to conduct regular audits. Staying up to date with documents like BRC makes this process painless for the exporters.

How can exporters get a BRC?

Unlike FIRA, Xflow currently does not provide BRC to our users. However, the process of obtaining BRC has become much easier recently thanks to digitization. Earlier, the BRC was a paper document. Now, a digital equivalent called eBRC is available, and is easy to secure once you have all the supporting documents. Here’s a step-by-step guide to getting your eBRC:

Step 1: Get the documents in order. Here’s a handy checklist of all the documents:

Export invoice: A copy of the commercial invoice stating the export transactions
Shipping bill: The bill of export that was filed with the customs department.
Foreign inward remittance advice (FIRA): A proof that shows the purpose for receiving cross-border payments.

Xflow offers its users an electronic copy of this (eFIRA) for every withdrawal.

Bank statement: To confirm the credit of the export payment.
Customs stamped EP copy of the shipping bill: The “export promotions” copy is a copy of your shipping bill that is issued by the customs department as export evidence. This comes with a customs department stamp.
Exporter’s declaration: A self-declaration from your firm confirming the receipt of payment.

Step 2: Approach a banking partner, once all the documents in order. The will bank verify eFIRA and other supporting documents against the shipping bill and create eBRC.

Once the the eBRC is created, the bank will generate an XML file containing all the eBRC details, and upload it to the DGFT website. The DGFT server will verify the submitted XML file for accuracy. If everything is in order, the server acknowledges the bank, confirming the successful upload.

How to download eBRC?

After the DGFT server verifies the XML file submitted by your bank, your eBRC should be ready for download. This process usually takes a few hours. Here’s how you can download the certificate once it is ready:

Visit the DGFT website
Log into your account using your user id and password
Look for ‘Repositories’ in the dropdown menu under ‘My Dashboard’
Under the ‘Bills Repositories’ section, click on ‘Explore’ to proceed to the Bills Repositories page
From the Select Bill drop-down, choose Bank Realizations (eBRC). Enter the relevant details and use the search function
All the eBRCs uploaded by the banks where you have your accounts will be displayed on the screen.If your eBRC has been successfully uploaded, it should be here
Scroll down to find the eBRC you need and click on the Bank Realization hyperlink
Click the Print eBRC button to generate and download your certificate

How to use the BRC to claim benefits?

After downloading eBRC from the DGFT website, exporters can avail the incentives mentioned above, like Duty Drawback Scheme, EPCG scheme, MEIS & SEIS. Here’s how:

First, verify that the bank has submitted an error-free e-BRC which reflects the consolidated realization value.
Log on to the Indian Customs Electronic Data Interchange Gateway (ICEGATE) platform and submit all shipping bills. The bill information will be automatically shared with DGFT. Remember to link the relevant shipping bill with eBRC. Exporters must also enter freight values, insurance and commission values in the refund application, as the e-BRC excludes such values.
After this, the DGFT will match the Free on Board (FOB) value of exported goods and the amount received against them as recorded in the eBRC, and decide the incentive to be granted.
In the case of multiple products, it considers the consolidated realization value, and incentivizes the exporter for the lower value between the two.

FAQs

What is BRC?

BRC stands for Bank Realization Certificate. BRC confirms that the payment you received from a foreign client corresponds to an actual export of goods or services.

Who issues BRC?

BRC is issued by your banking partner after verifying your Foreign Inward Remittance Advice (FIRA) against supporting documents that furnish proof of export.

Is BRC mandatory?

Yes, BRC is mandatory for exporters both to comply with RBI export regulations and to take advantage of export incentives from government agencies.

What are the penalties for not applying for BRC, if any?

Non-realization of export proceedings can lead to penalties up to three times the value of the export. BRC serves as proof of export realization, so it is important to have it to avoid such penalties. Moreover, non-submission of BRC can also lead to missed export incentives.