FEMA Remittance Mismatches — Comprehensive Bank-Level Solutions for Inward and Outward Transactions

 BY CA SUREKHA S AHUJA

A Ground-Reality Guide Under RBI Master Directions (FY 2025–26)

Why FEMA Mismatches Are an Expected Feature of Cross-Border Trade

In real-world cross-border commerce, FEMA mismatches are structural, not exceptional.

Indian businesses transacting with Asia-centric jurisdictions (Hong Kong, Singapore, China, UAE, Korea) routinely face mismatches due to:

• advance-based trading models

• multi-party group structures

• delayed logistics and documentation

• foreign exchange fluctuations

• evolving commercial terms

Recognising this, the Reserve Bank of India has consciously empowered Authorised Dealer banks to regularise genuine mismatches through documentation, without invoking penalty or compounding, as long as intent is bona fide.

RBI’s Embedded Framework — Regularise, Document, Close

Across Master Directions governing imports, exports, and reporting:

• Commercial failure is not treated as violation

• Procedural delay is not equated with contravention

• Substance overrides format

• Banks are the first and final resolution authority in most cases

As a result, over 95 percent of FEMA mismatches are resolved at the bank level itself.

Outward Remittance Mismatches — Import Side

Advance Remitted, Supplier Closed, No Import Took Place

Situation
Advance paid against PO; supplier dissolved or unreachable; no Bill of Entry after statutory period.

Bank-Accepted Resolution

• Purchase order and SWIFT proof

• Email follow-ups

• Foreign registry dissolution or strike-off extract

• CA confirmation that no Bill of Entry exists

• Self-declaration of non-receipt

Outcome
No-Import closure issued; write-off permitted (commonly up to USD 100,000) without RBI approval.

Advance Paid, Import Cancelled by Mutual Consent

Situation
Commercial cancellation due to pricing, logistics or regulatory reasons.

Solution

• Cancellation correspondence

• Supplier confirmation

• Refund SWIFT or adjustment agreement

Outcome
Transaction closed as cancelled import; no violation.

Goods Shipped, Bill of Entry Delayed or Lost

Situation
Goods shipped but customs clearance delayed or documents misplaced.

Solution

• Shipping documents

• Overseas warehouse or port confirmation

• Importer affidavit

• Bank extension approval

Outcome
Timeline extended; no penalty.

Partial Import Against Full Remittance

Situation
Only part of goods received; balance not supplied.

Solution

• Bill of Entry for received goods

• Supplier debit note / balance write-off confirmation

• Reconciliation statement

Outcome
Partial closure permitted.

Remittance Amount Does Not Match Invoice

Situation
Excess or short remittance due to forex movement, tolerance clause or renegotiation.

Solution

• Reconciliation statement

• Supplier confirmation

• Revised PO or credit/debit note

Outcome
Variance accepted; excess may be parked in EEFC.

Wrong Purpose Code Used

Situation
Incorrect FEMA purpose code selected during remittance.

Solution

• Invoice and agreement

• Self-declaration

• Online correction request

Outcome
Purpose code corrected; no fee, no penalty.

Import Through Third-Party Supplier

Situation
Remittance made to one entity; goods supplied by another.

Solution

• Tri-party agreement

• Commercial explanation

• Invoices and shipping documents

Outcome
Accepted if substance is clear.

Inward Remittance Mismatches — Export and Service Receipts

Invoice Raised on Indian Entity, Payment from Foreign Group Company

Situation
Holding or affiliate remits payment.

Solution

• Invoice copy

• SWIFT proof

• Group structure

• Consent email

• KYC of remitter

• CA genuineness certificate

Outcome
Credit allowed; FIRC issued.

Export Advance Received, Shipment Did Not Occur

Situation
Commercial cancellation or force majeure.

Solution

• Refund through banking channel, or

• Adjustment against future invoice with buyer NOC

Outcome
No utilisation certificate required if refunded.

Export Invoice Raised, Partial Payment Received

Situation
Balance delayed due to buyer constraints.

Solution

• Proof of substantial receipt

• Buyer correspondence

• Extension request

Outcome
FIRC issued for received amount; balance tracked.

Export Proceeds Realised Beyond Prescribed Period

Situation
Delayed realisation beyond normal timeline.

Solution

• Buyer justification

• Extension approval

• Evidence of recovery efforts

Outcome
Regularised without violation.

Currency Mismatch Between Invoice and Receipt

Situation
Invoice in one currency, receipt in another.

Solution

• Forex conversion working

• Bank rate confirmation

• Gain/loss declaration

Outcome
Accepted and adjusted.

Third-Party Receipt Through Overseas Agent

Situation
Payment routed via commission agent.

Solution

• Exporter authorisation

• Agency agreement

• Back-to-back invoices

Outcome
Purpose code aligned to commission receipt.

Over-Realisation or Short-Realisation of Export Proceeds

Situation
Received more or less than invoice.

Solution

• Reconciliation

• Buyer confirmation

• Adjustment against future invoices

Outcome
Regularised.

Intra-Group and Complex Structures

Intra-Group Settlement Without Matching Invoice

Situation
Group treasury or netting arrangement.

Solution

• Inter-company agreement

• Board resolution

• Fund flow explanation

• Consolidated KYC

Outcome
Treated as permitted trade/service flow.

EEFC Credits Without Immediate Underlying Invoice

Situation
Advance pooling or timing mismatch.

Solution

• Future invoice mapping

• Declaration of intended utilisation

Outcome
Accepted if adjusted within permitted period.

Income-Tax Overlay - Why FEMA Regularisation Protects 

Even after FEMA closure:

• Section 195 exposure may still be examined

• Form 15CA / 15CB consistency matters

However, a FEMA-regularised transaction is rarely treated as sham under income-tax proceedings, provided documentation is aligned.

How Banks Expect Submissions — The Universal Template

Banks expect:

• Clear narration

• Chronology of events

• Evidence of bona fide intent

• Concise document pack

• CA confirmation where values are high

Escalation to RBI FED is exceptional, not routine.

The Professional Reality

FEMA mismatches are not failures.
They are commercial explanations waiting to be documented.

When handled correctly:

• no Section 13 penalty

• no compounding

• no long-term compliance stain

When ignored, they become retrospective liabilities.

Closing Statement

In FEMA, truth plus documentation is compliance.

Banks are empowered to regularise — professionals are expected to explain.

That intersection is where real compliance exists.