RBI Eases Forex Rules to Boost Trade with Neighbours and Support Exporters
Source: PIB
The Reserve Bank of India (RBI) has introduced two significant amendments to its foreign exchange regulations, aimed at simplifying cross-border trade and providing greater flexibility to Indian exporters. The changes, announced as part of the RBI’s recent developmental policies, affect rules on lending and foreign currency accounts.
Promoting Regional Trade with Rupee Lending
In a major move to facilitate trade with neighboring countries, the RBI has now permitted Indian banks and their overseas branches to lend in Indian Rupees (INR).
This facility is extended to individuals, businesses, and even banks located in Nepal, Bhutan, and Sri Lanka. The primary objective of this amendment is to make cross-border trade transactions smoother and promote the use of the Indian Rupee in the region.
More Flexibility for Exporters’ Foreign Currency Accounts
The second amendment provides a significant operational relief for Indian exporters. Earlier in January 2025, exporters were allowed to open foreign currency accounts outside India to hold their export earnings. However, they were required to repatriate (bring back to India) any unutilized funds by the end of the month following the one in which the funds were received.
The RBI has now extended this repatriation period. Exporters will have up to three months to bring back their funds, but with a key condition: this extension is only applicable if the foreign currency account is maintained with a bank located in an International Financial Services Centre (IFSC) in India.
This change will give exporters more flexibility to manage their foreign currency cash flows, handle international payments, and hedge against currency fluctuations without the pressure of a short repatriation timeline.
The RBI has confirmed that the necessary changes to its Master Directions on “Export of Goods and Services” and “Deposits and Accounts” have been made to implement these new rules.
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