Set-Off and Write-Off of Unrealised Export Dues
Two ways an export entry closes without full payment. The courseware's percentage limits, and the 2026 rules that replaced them.
An export entry normally closes when the full value arrives by remittance. Two exceptions let it close otherwise. Set-off pays the export by cancelling it against an import payable to the same overseas party. Write-off (now framed as a reduction in export value) accepts that some or all of the money is never coming.
Both changed shape on 1 October 2026. The old Master Direction had fixed percentage limits and a long list of conditions; the new regulations hand the decision to the AD bank. CCFE study material teaches the old rules, so this page covers both.
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Set-Off: Netting Exports Against Imports
Regulation 7 of the 2026 Regulations lets an AD bank allow export receivables to be set off against import payables with the same overseas buyer or supplier, or with that party's overseas group or associate companies. The set-off must happen within the realisation period, or any extension the AD bank has allowed. A permitted set-off counts as realisation for the export.
Under the old Master Direction, set-off carried a longer list of conditions: one AD bank to run the arrangement, goods only against goods and services only against services, transactions with Asian Clearing Union countries kept outside, both legs in the same calendar year, and a written, enforceable agreement for group netting. Each export and import was still reported separately (gross) in EDPMS, IDPMS and FETERS.
Write-Off Limits in the Old Master Direction
Percentages of total export proceeds realised in the calendar year before the year of write-off. Reckoned cumulatively. These are the figures CCFE courseware tests.
| Who writes off | Limit |
|---|---|
| Self write-off by an exporter (not a status holder) | 5% |
| Self write-off by a status holder exporter | 10% |
| Write-off by the AD Category-I bank | 10% |
Old Write-Off Conditions
The limits applied only if all of these held:
- check_circleThe amount had been outstanding for more than one year.
- check_circleThe exporter produced documentary evidence of efforts to realise it.
- check_circleThe exporter had been the bank's customer for at least six months and was KYC/AML compliant.
- check_circleThe case fell in an accepted category: buyer declared insolvent (with an official liquidator's certificate), balance left after settlement through an Indian embassy or foreign chamber of commerce, goods auctioned or destroyed by port, customs or health authorities abroad, buyer untraceable, an undrawn balance of up to 10% of invoice value, legal action costing more than the dues, or similar.
- check_circleProportionate export incentives were surrendered.
- check_circleIn the first three categories (insolvency, embassy settlement, goods destroyed), the AD bank could write off without any limit. Bills settled by ECGC or an IRDAI-regulated insurer were written off on the claim settlement evidence.
- check_circleNot eligible: exports to countries with externalisation problems, and bills under investigation by agencies such as ED, DRI or CBI.
Limits and conditions as exam questions. No signup.
Write-Off From 1 October 2026
The 2026 Regulations have no separate write-off chapter and no percentage limits. Regulation 6 lets the AD bank allow a reduction in export value, including complete non-realisation, when the exporter's reasons satisfy it. Where the shipping bill or invoice is up to ₹10 lakh, the exporter's declaration is enough.
The AD bank's internal policy and SOP must cover adjustments for under-, over- and non-realisation, with clear delegation and an internal appeal route for the customer. If dues remain unrealised beyond one year past the due date, the exporter can ship further only against full advance or an irrevocable letter of credit.
How CCFE Tests This
Write-off is a steady source of questions in the FEMA-for-entities module: the 5% and 10% limits, the base (previous calendar year's realisations, not the current year's exports), the one-year outstanding condition, and which cases have no ceiling. The trap is the status holder line: their self write-off limit equals the AD bank's, not double it. For set-off, the classic wrong option is netting goods exports against service imports.
FAQs
What is the limit for self write-off of export bills?expand_more
Under the old Master Direction, 5% of the previous calendar year's export realisations for a normal exporter and 10% for a status holder, with the AD bank able to write off up to 10%. From 1 October 2026, there are no percentage limits; the AD bank decides reductions under Regulation 6.
Can export receivables be set off against import payables?expand_more
Yes. The AD bank may allow set-off against payables to the same overseas buyer or supplier, or their overseas group or associate companies, within the realisation period or any extension.
Is RBI approval needed to write off an unrealised export bill?expand_more
Not under the 2026 Regulations: the AD bank decides. Under the old Master Direction, cases outside the prescribed limits and categories went to RBI's regional office.
Can small unrealised export bills be closed without a write-off application?expand_more
Yes. For shipping bills or invoices up to ₹10 lakh, the AD bank can accept a reduction or non-realisation on the exporter's declaration.
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