The Reserve Bank of India (RBI) has introduced changes to the Foreign Exchange Management Act (FEMA) to boost the use of the Indian rupee (INR) in cross-border transactions. This move comes as the rupee hits a record low of ₹86.5 per dollar and export growth remains inconsistent.
Announced on Thursday, the updated rules aim to provide greater flexibility to exporters and enhance the global appeal of the rupee.
Here’s what’s changing:
Key Highlights of the Revised FEMA Rules
| Feature | Details |
|---|---|
| Exporters’ Flexibility | Indian exporters can now open overseas accounts in any foreign currency to receive export proceeds and make import payments. |
| Overseas INR Accounts | Foreign branches of Indian banks can open INR accounts for non-residents to settle permissible transactions with Indian residents. |
| Repatriable INR Accounts | Non-residents can settle transactions using balances in Special Non-Resident Rupee (SNRR) and Special Rupee Vostro Accounts (SRVA). |
| FDI in Non-Debt Instruments | NRIs can now use funds from repatriable INR accounts for investments, including foreign direct investments (FDI). |
Why These Changes Matter
- Global Reach for INR: The amendments aim to make the Indian rupee a preferred currency in global trade.
- Ease for Exporters: Exporters now have more flexibility in managing their trade payments and receipts.
- Encourages Investments: The updates make SNRR accounts more appealing, boosting foreign investor confidence.
Current Economic Context
The rupee recently hit a record low of ₹86.5 per USD, reflecting economic challenges and volatile global markets. Export growth has been inconsistent, with merchandise exports contracting in the second quarter of FY24.
Merchandise Exports (April-December 2024):
- Cumulative value: $321.71 billion
- Growth: 1.6% compared to $316.65 billion in the same period last year.
Geopolitical Risks
Geopolitical tensions, such as proposed tariff hikes by the United States, continue to impact trade dynamics. “Uncertainties in global markets pose significant risks to Indian exports,” noted CRISIL in a report.
Disclaimer: The information provided in this article is for informational purposes only and does not constitute professional advice or an endorsement of any particular product or service. While we make every effort to ensure the accuracy of the details shared, the content is based on publicly available information and reliable sources. Readers are encouraged to verify the details independently and consult with a professional advisor before making any decisions. Please exercise caution and stay informed when making any decisions.
