RBI Releases FEMA 2026 Export-Import Trade Regulations: What Businesses Need To Know

In its consistent effort to promote cross border trade and ease of doing business, the Reserve Bank of India ('RBI') initially floated the draft export and import regulations and directions on 2 July 2024, and 4 April 2025, inviting comments from the stakeholders.

Following the two rounds of stakeholder consultations and the receipt of multiple industry representations, the RBI notified the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 ('New Regulations') on 13 January 2026, followed by the issuance of the Directions on Export and Import of Goods and Services ('New Directions') on 16 January 2026 (collectively the '2026 Update').

The New Regulationsintroduces much-needed rationalisation and simplification of the legislative framework governing trade, i.e., export and import transactions in India. The changes are aimed at enhancing ease of doing business while affording greater operational flexibility to authorised dealer banks ('AD Bank'), in recognition of the evolving dynamics of cross-border transactions.

This article examines the key insights into the current trade framework and highlights the substantive reforms introduced under the 2026 Update.

Implementation timeline

The 2026 Updateshall come into force from 1 October 2026.

Upon its implementation, the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 , Master Direction – Export of Goods and Services, Master Direction – Import of Goods and Services and the list of 167 circulars specified in the annexure to the New Directions (collectively the 'Existing Provisions') shall stand superseded.

Action point for stakeholders

• Review of the current transactions, payment cycles, banking arrangements and specific permissions obtained from the RBI.
• Aligning the business with the proposed changes
• Transition management for export and import payments, MTT transactions and trade advances.
• Drafting and review of contracts with global trade counterparts.
• Review of the open entries in the Export Data Processing and Monitoring System ('EDPMS') and Import Data Processing and Monitoring System ('IDPMS') for regularisation of trade.
  

Relevant changes proposed to be implemented vide the New Regulations are summarised below:

1. Declaration of exports and handling of documents

Notable changes vide the New Regulations:

• An exporter may file a single EDF to report all service and software exports made to multiple recipients during a month.
• Exporters of services other than software, may submit the EDF on or before the date they receive payment for the export.
• The New Regulations introduces a new reporting obligation for exporters of services.
• The AD Bank may grant an extension for submitting the EDF if it is satisfied that the exporter's reason for the delay is valid.
• The New Regulations and the EDF (as provided in the Annex of the New Regulations) shall permit the export value to be reported as 'nil' in instances where goods are exported without consideration, and no prior approval from the RBI will be required in such cases.
  

LKS COMMENTS

The New Regulations introduces a unified, streamlined and time-bound reporting for exports of goods, services, and software. Although this expands the reporting obligations but at the same time it also simplifies the procedural complexity and enhances consistency for exporters and AD Banks.

It appears that the requirement of obtaining EDF waiver shall be discontinued. Export of goods without any consideration shall be required to be reported with 'nil' value in EDF.

2. Timeline of payment for export and import of goods, services and software

Notable changes vide the New Regulations:

• The AD Bank may credit or debit an exporter's or importer's account for export receipts or import payments only after verifying the bona fide of the transaction and updating or closing the related entry in the EDPMS or IDPMS.
• For trades where the bill of entry or shipping bill (for goods) or invoice (for services or software) is up to ₹10 lakh (or its foreign currency equivalent), the RBI shall permit reconciliation and closure of EDPMS/IDPMS entries based on a trader's declaration confirming realisation of export proceeds or completion of import payment. Traders may submit this declaration to the AD Bank on a quarterly, consolidated basis for bulk reconciliation and closure of entries.
  

LKS COMMENTS

The New Regulations propose a notable change wherein Indian traders may be permitted to store their goods in the overseas warehouse for more than 15 months from the shipment date without being required to realise the export proceeds, as the realisation timeline pertaining to export shall be linked to the 'date of sale' of the goods instead of shipment of the goods from India. Additionally, AD Banks have been authorised to grant extensions for both export and import timelines for goods and services.

The RBI vide its Notification No. FEMA 23(R)/(7)/2025-RB, dated November 13, 2025, extended the export realisation timeline from 9 months to 15 months. The same time period has been retained in the New Regulations. The timeline pertaining to import transactions shall be based on the underlying contract. The revision in timeline will offer greater flexibility to traders in managing their funds and operations. Interestingly, an additional time-period of three months is being provided for export realisation where export of goods and services are invoiced or/and settled in Indian Rupees.

Additionally, the New Regulations has introduced more clarity in terms of realisation of export proceeds by including set-off between parties as a valid realisation method. This is in line with the jurisprudence under Income Tax and Indirect Taxes where set-off between two parties was considered as valid realisation of foreign exchange.

3. Set-off of export receivables with import payables

LKS COMMENTS

Set-off of payment pertaining to goods against services is prohibited under the Existing Provisions. The New Regulations substantially liberalises this position by permitting set-off against any payables, whether relating to goods or services between the eligible parties. This change significantly enhances transactional flexibility and cash flow efficiency by enabling businesses to net their cross-border obligations more effectively, irrespective of the nature of the underlying transaction. Importantly, the amendment aligns the regulatory framework with commercial realities, recognising the increasingly integrated and blended nature of goods and services in cross-border trade and specifically with the increase in warehouse exports with add-on fulfilment services from overseas counterparts.

4. Third party receipts and payment

LKS COMMENTS

Thedraft Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2025introduced a relaxation permitting AD Banks to process payments to or receipts from parties other than the declared third party, subject to verification of the bona fide nature of the underlying transactions. This provision has been removed in the New Regulations. Notwithstanding this omission, the revised framework significantly streamlines the overall process governing third party payments when compared with the existing regulatory requirements. The requirement for a tripartite agreement although not addressed in the New Regulations might stem from the AD Bank's internal policy or SOP.

5. Reduction in the export realization

Notable changes vide the New Regulations:

• The AD Bank have been bestowed with immense power to close the pending EDPMS entries which are linked to any under-realisation or non-realisation of invoices.
• The option of self write-off of export receivables has been omitted.

LKS COMMENTS

Under the Existing Provisions, reductions in export invoice value are permitted by AD Banks only for specific reasons, such as cash discounts etc, and are subject to limits. Additionally, RBI permission is also required in specific cases for write-off of receivables. The New Regulations introduces a significantly flexible approach wherein shipping bill or invoices upto INR 10 lakhs can be reduced solely on the basis of exporter's declaration. This reduces administrative burden on the AD Banks for small transactions and provides operational flexibility for exporters, particularly SMEs or smaller-value transactions.

In contrast to the Existing Provisions, the New Regulations do not specifically address the requirement of surrendering the export incentives under the FTP, GST or any other government's export promotion schemes. It appears that the refund of export incentives will be governed by the respective statutes and policies providing incentives to exporters.

It will be interesting to note AD Bank's stance on clearing out multiple invoices for its clientele since self-write-off of export invoices will be discontinued. Different policies adopted by different AD Banks might also result in 'bank-shopping'.

6. Advance for exports and imports

LKS COMMENTS

The New Regulations governing advance receipts for imports reflect a more flexible framework, placing greater importance on the underlying contract and the discretionary powers of the AD Bank. The specific timeline relaxation is intended to support exporters who face genuine delays in shipping goods after receipt of the advance payment. However, the mechanism for refunding unutilized advance amounts requires further clarification.

7. Caution listing

LKS COMMENTS

Caution listing led to reputational risk for exporters and often led to operational restrictions for future trade transactions. Reducing the formal caution listing process shall reduce the regulatory burden and will boost more cross border transactions.

8. Merchanting Trade Transaction (MTT)

Notable changes vide the New Regulations:

• The New Regulations allow for an extension of the timeline between the outward remittance and the corresponding inward remittance.
• The present requirement to compulsorily hold the inward remittances in the merchanting trader's Exchange Earners Foreign Currency (EEFC) account if received before outward remittance has been omitted in the New Regulations.
• The New Regulations further mandate that documents evidencing MTT must be submitted to the AD Bank to verify the authenticity of the transaction. Once satisfied, the AD Bank will credit or debit the customer's account for any MTT‑related cross‑border transaction and simultaneously update the relevant entries in the EDPMS and IDPMS.
  

LKS COMMENTS

The relaxation of MTT conditions and compliance requirements is expected to ease operational processes. However, it remains to be seen how AD Banks will frame their policies on write‑off provisions specifically for MTT, as the New Regulations do not explicitly address the same.

The removal of mandatory profits and 9 months' timeline for completing MTT is a welcome move. The permissibility of third-party payments for MTT transactions represents a significant operational flexibility, thereby helping overcome logistical or geographical constraints. Businesses can now route payments through intermediaries or group entities, which is particularly useful in complex cross-border supply chains.

Other notable highlights in the 2026 Update:

• Import of gold and silver – AD Banks shall not permit any advance remittance for the import of gold and silver unless specifically permitted under the Foreign Exchange Management Act, 1999 or the rules, regulations and directions framed thereunder.
• Project Export – AD Banks may allow receipts and payments related to project exports based on the terms of the project contract, after confirming the bona fide of the project. Project exporters are also permitted to use temporary cash surpluses earned abroad for short‑term investments (maturity of one year or less), such as treasury bills or bank deposits outside India, under the monitoring of their AD Bank. The Memorandum of Instructions on Project and Service Exports (PEM), 2014 will be repealed w.e.f. October 1, 2026.
• Miscellaneous– Under the current legislative framework, grievance redressal has largely been undertaken in accordance with the RBI directions. However, unlike the existing provisions, the New Regulations grant AD Banks greater operational autonomy to approve payment timelines or extensions for receipt of payments, as well as to permit set-offs and reduction in export realisation, based on the bona fide nature of the underlying transactions.
• AD Banks's Internal Policy
• The New Regulations grants AD Banks increased authority and responsibility, requiring them to formulate detailed internal policies and SOPs for transaction handling and reporting, and to make these publicly available on their websites.
• AD Banks must clearly delegate transaction approval responsibilities, establish a structured escalation mechanism for customer grievances, and set up an appeal mechanism for review at higher levels.
• AD Banks are required to ensure that transaction‑related charges remain reasonable and proportionate.
• The AD Banks are not permitted to impose any penalties for regulatory delays or compliance breaches.
• The AD Bank must route all reference to the RBI through the PRAVAAH portal and report any suspicious transaction to the Directorate of Enforcement (DoE).
  

LKS COMMENTS

Cross-border trade plays a vital role in boosting a country's economic growth. With accelerated globalisation, India is emerging as one of the major players in the global supply chain.

Through the 2026 Update, the RBI aims to create a more business‑friendly environment and promote ease of doing business by allowing greater contractual flexibility and aligning the regulatory framework with evolving cross‑border trade dynamics. By omitting certain regulatory hurdles which deter potential overseas trade collaboration and granting wider discretion to AD Banks in trade‑related matters, the RBI enables AD Banks to tailor internal policies and SOPs to suit operational requirements.

The new regulatory framework is intended to boost more cross border trade and position India as a bigger market player in the global supply chain.

However, this increased flexibility may also result in inconsistencies in interpretation and implementation of the 2026 Update across different AD Banks. Furthermore, several critical issues remain unaddressed in the 2026 Update which inter-alia includes:

• Treatment of exports carried out under operating lease arrangements;
• Clarifications related to long-term supply contracts;
• Permissibility of agency commissions in merchanting trade transactions;
• Imports on FOC (free-of-cost) basis;
• Trade with Asian Clearing Union (ACU) countries and jurisdictions under OFAC sanctions; and
• Provisions relating to ongoing or legacy trade transactions.
  

The 2026 Update is a welcome change to encourage cross border trade and position India as a global business hub. However, the true extent of such liberalisation shall depend on how AD Banks formulate and implement their internal policies.

The RBI has also published its responses to various stakeholder representations made in the past 2 years. The same can be accessed here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.