RBI’s New Framework for Trade
The Reserve Bank of India (RBI) has introduced a comprehensive overhaul of its foreign exchange regulations, merging the export and import of goods and services under a unified framework. Announced on January 13, 2026, the new Foreign Exchange Management (Export and Import of Goods and Services) Regulations (Fema), set to take effect in October 2026, aim to simplify procedures and enhance compliance, particularly for smaller exporters.
This change comes after nearly two years of discussions and two rounds of public consultations. The RBI’s move is expected to increase transparency and streamline operations within the trade community, thereby improving the ease of doing business for exporters and importers alike.
Key Features of the New Regulations
Enhanced Reporting and Compliance for Service Exporters
One of the significant aspects of the new regulations is the inclusion of service exporters within the formal reporting framework, previously reserved solely for goods exporters. Sunil Kumar, a partner in tax and regulatory services at EY India, noted that this aligns service exports with the existing processes for goods, facilitating better transparency in trade transactions.
Service exporters will now have a clearly defined 30-day window from the date of invoice issuance to file necessary declarations. This also includes the flexibility for monthly consolidated filings and extensions approved by their banks, making compliance considerably less burdensome.
Responsibilities of Authorized Dealer Banks
The RBI has shifted more responsibilities onto authorized dealer banks, which are now tasked with the oversight of day-to-day trade-related operations according to their internal policies. This decentralization is expected to enhance operational efficiency and responsiveness to the needs of exporters. Banks must actively monitor delayed payments and are obliged to pursue unpaid export proceeds.
This marks a fundamental change in how trade regulations will be administered, allowing banks more discretion as they will be more closely situated to their customers. Kumar further elaborated, “With banks now having wider discretion, we expect to see a more streamlined process that will support the ease of doing business for exporters.”
Stricter Measures for Export Payments
To ensure discipline in the realization of export proceeds, the new framework stipulates that if any dues remain outstanding beyond a year beyond the allowed realization period, future exports may only proceed with full advance payments or through an irrevocable letter of credit.
This regulation is intended to mitigate risks associated with outstanding payments for exporters and holds them accountable. Notably, the RBI has preserved the existing timeline of 15 months for the realization and repatriation of export proceeds for both goods and services.
Provisions for Smaller Transactions
The RBI has recognized the need to ease procedural requirements for smaller exporters. Transactions amounting to ₹10 lakh (approximately $12,000) will be allowed to be closed based on self-declarations, including provisions for quarterly bulk submissions, reducing the documentation needed for these small-value exporters.
Experts have indicated that such provisions could provide much-needed relief for micro, small, and medium enterprises (MSMEs), thus playing a vital role in strengthening India’s export capabilities.
Framework for Import Activities
On the import front, banks are directed to closely monitor delayed payments and verify advance remittances that fail to result in actual imports. New conditions will apply, including the trigger of standby letters of credit for repeat defaults. This aims to tighten the oversight on import transactions, thereby enhancing security in the foreign exchange environment.
Overall Benefit to Exporters and Importers
Under the new regulations, clarity is expected to improve significantly for exporters, particularly those in the service and software sectors. Comprehensive timelines for export declaration filings and options for consolidated monthly filings are anticipated to minimize compliance uncertainty.
Observing the broader economic context, trade data reveal a significant increase in India’s merchandise exports from April to December 2025, reaching $330.29 billion, compared to $322.41 billion in the previous year. However, the imports surged to $578.61 billion, resulting in a sizeable trade deficit of $248.3 billion. Experts cite these reforms by the RBI as a potential method to combat this persistent trade imbalance.
Long-Term Expectations
As India moves towards implementing these updated regulations, industry stakeholders view this consolidation as a step towards increasing efficiency and facilitating a better trade environment. With these measures, the RBI reaffirms its commitment to simplifying procedures and enabling smoother cross-border transactions.
Future Regimes and Follow-Up Action
Further updates regarding detailed guidelines are expected to be released by the RBI in the lead-up to the October 2026 implementation date. This will likely include the specifics related to eligibility criteria, timelines, and necessary documentation, ensuring all stakeholders are well-informed and prepared.
In summary, the new Fema framework signifies a pivotal shift in how trade is regulated in India, fostering improved compliance measures and operational efficiencies. The focus on smaller exporters and service providers highlights the RBI’s recognition of the vital role these sectors play in the economy.