rbi-tightens-leash-on-trade-loopholes

The Reserve Bank of India has issued a fresh set of draft regulations aimed at simplifying and streamlining export and import transactions under the Foreign Exchange Management Act (FEMA), 1999.

 

These new proposals are intended to enhance the ease of doing business and bring greater clarity by consolidating all relevant instructions into a single document.

 

Released on Friday, the revised draft regulations come after the central bank first floated an earlier version in July last year.

 

Following public feedback and further discussions with various stakeholders, the Reserve Bank has now updated its proposals to better reflect practical considerations and concerns raised during consultations.

 

One of the key proposals outlined in the draft pertains to exporters whose payments remain unrealised for an extended period.

 

If an exporter’s proceeds remain outstanding for more than two years from the due date, and if their cumulative unrealised export proceeds cross ₹25 crore, the draft mandates that they can undertake further exports only if they receive full advance payment or operate under an irrevocable letter of credit. 

 

This provision aims to reduce the risks associated with non-realisation of export earnings and promote timely settlement of cross-border trade transactions.

 

In another significant move, the RBI has proposed restrictions on advance payments for the import of precious metals. Under the revised draft, authorised dealers will not be permitted to process advance remittances for imports of gold and silver.

 

This proposal appears designed to ensure tighter control over high-value imports and prevent potential misuse of advance remittance facilities.

 

The central bank also emphasised that the revised regulations are focused on removing fragmentation and confusion by integrating all directions and instructions to authorised dealers – including procedures for managing export and import-related transactions – into one comprehensive document. Previously, these were issued in a piecemeal fashion across different notifications and circulars.

 

The RBI is currently seeking public comments and suggestions on the revised draft. Stakeholders have been invited to submit their feedback by 30 April 2025.

 

Once finalised, these regulations are expected to provide a clearer operational framework for banks, exporters, importers, and other parties involved in foreign trade.

 

By pushing forward with such reforms, the central bank is attempting to balance the dual goals of strengthening regulatory oversight and facilitating smoother, more efficient trade transactions for Indian businesses engaged in the global market.