September 12, 2023

A Guide to DPX 2 Form

Export of goods and services forms an important part of the economy of every country, whether developing or developed, as exports bring foreign currency to the country. Since, a country is providing its resources to another country, therefore, government makes all the efforts that corresponding foreign currency flows into the country at the earliest. For this purpose, various regulations are provided under Foreign Exchange Management Act (FEMA). As per FEMA, foreign currency with respect to export of goods and services should be brought into the country within 9 months from date of export.

However, there can be certain genuine transactions where consideration can’t be realised within the time frame provided under FEMA. The Exports for which payment is collected, whether full or in part, beyond the time period permitted under FEMA are known Deferred Payment exports. Deferred Payment contracts are permitted for various contracts such as Turnkey Projects, Civil Construction contracts etc. However, before entering into deferred payment contracts, the exporters are required to obtain prior approval from Authorised Dealer or Reserve Bank of India.

Following is the sequence of forms filed for obtaining approval for Deferred Payment Contracts:

DPX-1: Application filed by Exporter after award of contract for export on deferred Payment/Turnkey basis.
DPX-2: Banker’s comments on the application in Form DPX 1 submitted by the exporter for export on deferred payment/turnkey basis
DPX-3: Progress Report from Exporter

In this article, a detailed discussion has been carried out of Form DPX-2.

1. What is Form DPX 2

When an exporter files an application in Form DPX-1 for export on deferred Payment Basis/Turnkey basis then in such case, Banker may provide his comments on such application.
Banker’s Comments are provided in Form DPX-2.

2. When is Form DPX-2 filed

According to Paragraph B7 (vi) of PEM, in cases where the value of the contract proposal exceeds U.S. Dollar 100 Million, Form DPX-2 is submitted by Authorised Dealer alongwith Application in Form DPX-1 and copies of contract with Various institutions and Reserve Bank of India for approval purpose.
Upon receipt of such an application, Exim Bank will convene a meeting of the Working Group within a week of the receipt of the application to consider the final terms and conditions of the contract and to grant a package post-award clearance for the contract.
Copies of the letter of approval issued by Exim Bank will be forwarded to all members of the Working Group, concerned Regional Office of Reserve Bank of India and exporter’s bankers for necessary action.

3. What information and documents does one need in hand to file Form DPX 2

Every document needs to be filled with utmost importance and attention to avoid any room for misfortunes. Producing the most transparent form with all the information that is true to your knowledge is crucial under Form DPX 2.

As mentioned above, DPX-2 is filed by the Banker, therefore, export should provide the information in Form DPX-1 with utmost care. Following are the information provided under form DPX-2 by the banker:

a. Comments on the Exporter

Management of the exporter
Export Performance
Financial Position of the Exporter- Banker submits operational/Financial indicators based on past 3 years’ financial statements alongwith brief comments on same.
Past experience of the exporter, if any, relating to deferred payment or turnkey exports

b. Comments on the Export contract

The Banker shall provide comments on following details of export contract:

The Buyer – Here, Status reports are required to obtain on non-Govt. Buyers.
Brief comments (qualitative) may be furnished. inter alia, the following aspects :

Scope of work
Payment terms
Security for payments
Foreign exchange outgo/cash inflow comparison (for deferred payment offers)
Exchange Risk
Provision for cost escalation, arbitration, liquidated damages, etc.

C. Comments on Sub-suppliers

The banker provides brief comments on the major sub-suppliers covering their :

past experience,
standing,
value, and
scope of work of each sub-contract.

d. Comment on the Profitability of the Export contract

Under this sub-heading comments on the cost profitability computation are to be furnished.

e. Comments on Banking Facilities Required

Comments on the requirements of credit/guarantee facilities that have been stated in Form DPX 1.
Participation arrangements
- Whether participation of EXIM Bank/other commercial banks in the various facilities is required, and
- If so, the extent of participation required
- The major terms and conditions which the bank would like to stipulate may also be indicated.

Beyond the information provided above, if there’s any other information that may stand relevant to the application, one must provide the same under this sub-heading,

4. Important Points To Remember

Keep the above-mentioned information with you beforehand, to avoid any unwanted delays.
Make sure to review all the information before submission.
For one to fill Form DPX – 2 to their best knowledge, it is important to understand Form DPX 1. Check out this article and get a brief insight into Form DPX 1.

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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