Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026

 RBI Introduces New FEMA Regulations for Export and Import: What Businesses Need to Know

Key Changes Coming October 2026

The Reserve Bank of India has issued comprehensive new regulations governing foreign exchange management for export and import of goods and services, set to take effect from October 1, 2026. These regulations supersede the 2015 framework and introduce several significant changes that will impact exporters, importers, and authorized dealers.

Extended Timeline for Export Realization

One of the most notable changes is the extension of the realization period for export proceeds. The new regulations provide:

For Foreign Currency Transactions:

• Exporters now have 15 months (up from the previous timeline) to realize export proceeds from the date of shipment for goods or invoice date for services
• Project exports follow contract payment terms with greater flexibility

For Indian Rupee Settlements:

• An extended period of 18 months is allowed for exports invoiced or settled in Indian Rupees
• This applies from shipment date for goods, invoice date for services, or sale date for warehouse exports

Authorized dealers can grant further extensions upon request if satisfied with the reasons provided, offering additional flexibility to businesses facing genuine delays.

Simplified Compliance for Small Transactions

The regulations introduce a simplified compliance framework for smaller transactions valued up to ₹10 lakh (or equivalent in foreign currency):

For Exports:

• Entries in the Export Data Processing and Monitoring System (EDPMS) can be closed based on a simple declaration from the exporter
• Quarterly bulk closure of entries is permitted
• Reduction in export value (including non-realization) can be permitted based on exporter declaration alone

For Imports:

• Similar simplified procedures apply for Import Data Processing and Monitoring System (IDPMS)
• Declaration-based closure eliminates excessive documentation requirements

Enhanced Operational Flexibility

The new framework provides several operational enhancements:

Set-off Provisions: Exporters can now set off export receivables against import payables with the same overseas buyer/supplier or their group and associate companies within the stipulated realization period.

Third-Party Transactions: Authorized dealers may permit third-party receipts and payments (from parties other than the actual buyer or seller) for both exports and imports, provided they are satisfied with the transaction's authenticity.

Advance Payment Protections:

• Authorized dealers can specify thresholds beyond which advance import payments require standby Letters of Credit or guarantees
• Exporters with unrealized proceeds beyond one year from the due date must undertake future exports only against full advance or irrevocable Letter of Credit

Merchanting Trade Transaction Updates

For businesses engaged in Merchanting Trade Transactions (MTT), the regulations stipulate:

• The period between outward and inward remittances should not exceed six months
• Extensions possible with valid reasons and dealer satisfaction
• Remittances must typically be between the actual overseas seller and buyer, with third-party transactions allowed under specific circumstances

Strengthened Monitoring and Reporting

The regulations place significant responsibility on authorized dealers to:

• Maintain comprehensive internal policies and Standard Operating Procedures (SOPs)
• Ensure reasonable and proportional charges for services rendered
• Prohibit penalty charges on customers for regulatory delays or violations
• Disclose policies and main SOP features on their websites
• Monitor all transactions through EDPMS and IDPMS systems
• Report all foreign trade transactions through the Foreign Exchange Transaction Electronic Reporting System (FETERS)

Interest Rate Compliance

An important provision addresses interest payable on advance payments:

For both advance payment received for exports and delayed payments for imports, any interest charged must not exceed the all-in-cost ceiling of trade credit as specified in the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018.

Special Provisions

Project Exports: Project exporters can deploy temporary cash surpluses generated outside India in short-term instruments (with maturity of one year or less), including treasury bills and bank deposits abroad, subject to authorized dealer monitoring.

Gold and Silver Imports: No advance remittance is permitted for gold or silver imports, maintaining strict controls on precious metal transactions.

INR Trade Settlement: The framework accommodates international trade invoicing and settlement in Indian Rupees, with authorized dealers guided by RBI's specific guidelines on this broad framework.

What Businesses Should Do Now

With the October 2026 implementation date approaching, exporters and importers should:

1. Review existing contracts and payment terms to align with new timelines
2. Engage with authorized dealers to understand their internal policies and SOPs
3. Assess whether transactions can benefit from the simplified compliance framework for smaller values
4. Evaluate opportunities for set-off arrangements between export receivables and import payables
5. Ensure proper documentation systems are in place for the new Export Declaration Form (EDF)
6. Consider the benefits of INR-denominated transactions given the extended 18-month realization period

Conclusion

The Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 represent a significant modernization of India's foreign trade compliance framework. The extended timelines, simplified procedures for smaller transactions, and enhanced operational flexibility demonstrate the RBI's commitment to facilitating ease of doing business while maintaining robust monitoring mechanisms.

Businesses engaged in international trade should begin preparing for these changes well before the October 2026 implementation date to ensure smooth compliance and to leverage the new flexibilities these regulations offer.