RBI Revamps Foreign Exchange Rules to Streamline Trade Processes
The Reserve Bank of India has completely revamped foreign exchange regulations that were over a decade old. This major overhaul brings exports and imports of goods and services under a single, unified set of rules. The move aims to simplify procedures, ease compliance burdens for smaller exporters, and strengthen monitoring through advanced digital systems.
New Regulations Set to Take Effect in October 2026
The new Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, were officially notified on January 13. They are scheduled to come into force after a nine-month transition period in October 2026. These regulations replace the previous export rules from 2015. The RBI made the official announcement on Friday.
This comprehensive revision follows two rounds of public consultation and nearly two years of careful deliberation. Given India's well-developed foreign trade policy, customs laws, and other sector-specific regulations, the RBI has now placed greater responsibility on authorized dealer banks. These banks will manage day-to-day trade-related matters based on their internal policies and assessment of each transaction's legitimacy.
Shift Toward Bank-Led Regulation
This marks a significant shift in how trade regulation is administered, according to Sunil Kumar, partner for tax and regulatory services at EY India. With banks now having wider discretion and being closer to their customers, the process is expected to become more streamlined. This change supports the broader goal of improving ease of doing business in India.
One particularly important change involves service exporters. They must now operate within the formal reporting system. This requirement adds transparency and brings services exports in line with how goods exports are already handled under FEMA regulations.
Tighter Discipline on Export Payments
The new framework also tightens discipline around the realization of export proceeds. If an exporter's dues remain outstanding for more than a year beyond the allowed realization period, including any bank-approved extension, further exports may only proceed against full advance payment or under an irrevocable letter of credit.
Exporters of goods will continue to declare shipment values through the Export Declaration Form embedded in shipping bills at Electronic Data Interchange ports. Service exporters now have a defined 30-day window from invoice issuance to file declarations. They also gain flexibility for consolidated monthly filings and bank-approved extensions.
Software exports have been explicitly brought under the definition of services. Authorized dealers and the Software Technology Parks of India are recognized as specified authorities for this purpose.
Enhanced Role for Banks
Banks receive more oversight responsibilities under the new rules. They have discretion to grant extensions on a case-by-case basis while being required to actively follow up on overdue export proceeds. For smaller transactions up to ₹10 lakh, exporters and importers can close outstanding entries in the RBI's monitoring systems based on self-declarations, including quarterly bulk submissions. This eases procedural burdens for MSMEs and service exporters.
The regulations also codify existing flexibilities such as under-realization of export value, set-off of export receivables against import payables, and third-party receipts and payments. These remain subject to bank satisfaction regarding transaction genuineness.
Specific Provisions for Different Transactions
Merchanting trade transactions involving intermediaries must now be completed within six months between inward and outward remittances, though banks may grant extensions. Advance remittances for imports will continue to be permitted, but advance payments for gold and silver imports are specifically prohibited.
On the import side, banks must closely track delayed payments and advance remittances that do not materialize into imports. Stricter conditions apply, such as standby letters of credit being triggered for repeat defaults.
Procedural Clarity and Monitoring
For exporting companies, the revised framework introduces greater procedural clarity, particularly for service exporters, software exporters, and smaller firms. Defined timelines for filing export declarations, along with the option of consolidated monthly filings, should reduce compliance uncertainty and dependence on varying bank practices.
Under the earlier framework, FEMA regulations and RBI directions governed import payments, advance remittances, and reporting. However, these were handled largely through RBI circulars, master directions, and banking practice rather than through a single, consolidated regulation.
The new provision allowing closure of export monitoring entries for transactions up to ₹10 lakh through self-declaration, including quarterly bulk submissions, will likely ease documentation requirements for small-value exporters.
At the same time, exporters will face closer monitoring by authorized dealer banks. Mandatory follow-up on delayed realization of export proceeds and restrictions on further exports in cases of prolonged non-realization will be enforced.
Standardized Banking Procedures
The requirement for banks to establish detailed internal policies and standard operating procedures should make compliance processes more standardized across banks, according to Vinod Kumar, president of the SME Forum. This will shape how exporters seek extensions, reductions in realization, and settlement adjustments.
The RBI has directed authorized dealers to implement detailed internal policies and standard operating procedures. They must disclose charges transparently and ensure customers are not penalized for regulatory delays. This signals a sharper focus on process discipline within banks alongside easier compliance for genuine exporters and importers.
Impact on Individuals and Trade Data
For individuals dealing with foreign exchange, including students, tourists, and those sending or receiving money abroad, the impact remains indirect. The regulations primarily govern trade in goods and services rather than personal remittances. However, stronger monitoring and standardized bank processes could lead to smoother cross-border transactions overall.
India's total merchandise exports during April–December 2025 rose to $330.29 billion from $322.41 billion a year earlier. Imports increased to $578.61 billion, resulting in a trade deficit of $248.3 billion. In December 2025 alone, exports rose to $38.51 billion from $37.80 billion a year earlier, while imports climbed to $63.55 billion from $58.43 billion. This pushed the monthly trade deficit to $25.04 billion, compared with $24.53 billion in November 2025 and $20.63 billion in December 2024, according to commerce ministry data.
