A write-off is a financial or accounting process through which a business removes an amount from its books when it is no longer expected to be recovered. It is generally used when an outstanding amount has become difficult or impossible to collect.
For exporters, a write-off of unrealised export proceeds is subject to applicable RBI rules, conditions, and documentation requirements. Therefore, the amount is not simply removed from the records; the exporter or authorised dealer bank must follow the prescribed process and meet the relevant requirements.
How It Works:
- Business identifies an amount that is unlikely to be recovered.
- Supporting records and reasons for non-recovery are reviewed.
- Applicable write-off rules and limits are checked.
- The amount is written off in the relevant records.
- Required reporting or regulatory procedures are completed.
Benefits:
- Keeps financial records more accurate
- Removes long-outstanding unrecoverable amounts
- Helps manage bad debts and receivables
- Supports compliance with applicable reporting requirements
Example:
An Indian exporter has an overseas receivable of US$5,000 that remains unpaid after repeated recovery efforts, and the customer has become insolvent. If the transaction meets the applicable RBI conditions, the exporter may be able to write off the unrealised export proceeds through the prescribed process.