RBI draft on Foreign Exchange Management regulations — how's it going to ease export-import norms

In line with the government’s consistent efforts over the past few years to liberalise policies governing foreign exchange transactions, the Reserve Bank of India (RBI) released draft Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2024 (Proposed Regulations) in the first week of July. Once notified, these will supersede the existing Foreign Exchange Management (Export of Goods & Services) Regulations 2015 (existing regulations). 

Promoting Ease of Business

The Proposed Regulations aim to promote ease of doing business for small importers and exporters, and empower Authorised Dealers (AD banks) to provide quicker and more efficient services to their customers.

One significant introduction is the applicability of these regulations to the export of ‘services’, an area lacking clarity in the existing regulations. Currently, there is no filing or reporting requirement for the export of services. However, under the Proposed Regulations, every exporter will be required to file a common Export Declaration Form for the export of services. Additionally, the exporter shall be required to submit to the specified authority documents related to the export of services within 21 days from the date of invoice.

Realisation of Export Proceeds

Export proceeds for services rendered must be realised within 9 months from the date of invoice. If this timeline is not met, AD banks have the authority to extend the period, provided a reasonable and sufficient cause is shown by the exporter. AD banks are also permitted to allow reductions in the full export value following the RBI’s directions. 
Any advance payment received for the export of goods and services must be refunded if the exporter cannot fulfill the export obligations within the contracted period. AD banks have the power to extend this timeline. Similarly, this provision applies to advance payments made for the import of goods and services.

Clarity on Advances

The Proposed Regulations clarify that advances received for export of goods and services where no goods or services are exported and no refund is made will be subject to FEMA (Foreign Exchange Management Act, 1999) Borrowing and Lending Regulations. This addresses the ambiguity in the existing regulations regarding non-provision of export services or failure to refund advance where AD banks have varying interpretations.

Deferred Payment Terms and Special Contracts

Exporters must now obtain prior approval from AD banks before entering into any export arrangements involving deferred payment terms, turnkey projects or civil construction contracts.

The Proposed Regulations, which are open for public comments and feedbacks till September 1,  demonstrate the RBI’s commitment to regulating foreign trade transactions by rationalising the norms for import and export transactions and delegating powers to AD banks.