Key Changes in FEMA Export and Import Regulations Effective 1 October 2026

The Reserve Bank of India has introduced a new framework governing export and import transactions under FEMA. These regulations are effective from 1 October 2026 and will apply only to transactions initiated on or after that date. Transactions undertaken up to 30 September 2026 will continue to be governed by the earlier FEMA regulations.

Greater Delegation of Powers to Authorised Dealer (AD) Banks

A significant feature of the new regulations is the increased role of Authorised Dealer (AD) Banks. Several approvals and operational decisions that previously required RBI involvement can now be handled directly by AD Banks, resulting in faster decision-making and reduced regulatory intervention.

Mandatory AD Bank Relationship for Exporters

Under the revised framework, exporters operating outside the STPI structure are also required to maintain a designated AD Bank relationship, and foreign exchange transactions relating to exports and imports must generally be routed through such AD Bank. This requirement does not typically extend to individual professionals or consultants rendering services overseas in their personal capacity.

Simplified Export Realisation Compliance for Small-Value Exports

Where the value of a shipping bill or export invoice does not exceed ₹10 lakh (or equivalent foreign currency), AD Banks may close the EDPMS entry based on a declaration from the exporter confirming realisation or other closure circumstances. The declaration may also be submitted periodically on a consolidated basis rather than individually for each export transaction, thereby reducing compliance burden.

Extension of Export Realisation Period

One of the most beneficial changes for exporters is the extension of the export proceeds realisation period from 9 months to 15 months from the date of export. This provides additional flexibility in dealing with customers located in jurisdictions where longer credit periods are customary.

Reduction in Export Realisation Permitted by AD Banks

AD Banks have been granted wider powers to permit reduction in export realisation under specified circumstances, subject to satisfactory justification and compliance with FEMA requirements. This will facilitate resolution of commercial disputes, product quality claims, and pricing adjustments without requiring separate regulatory approvals.

Set-off and Netting Arrangements

The revised regulations provide greater flexibility for exporters and importers to undertake set-off or netting arrangements with the same overseas counterparty, subject to approval and satisfaction of conditions prescribed by the AD Bank. This is expected to reduce transactional costs and foreign exchange remittances.

Third-Party Receipts and Payments

AD Banks have been empowered to permit third-party payment and receipt arrangements. Accordingly, export proceeds may be received from, or import payments may be made to, parties other than the direct contracting entity, subject to appropriate documentation and compliance requirements.

Relaxation in Import Payment Timelines

Earlier, import payments were generally expected to be completed within specified FEMA timelines. Under the revised framework, the due date can be aligned more closely with the contractual terms agreed between the importer and the overseas supplier. Consequently, businesses should carefully negotiate payment terms while entering into foreign vendor agreements.

Restrictions on Further Exports in Cases of Outstanding Realisation

Where export proceeds remain unrealised beyond the permissible period, regulatory restrictions may apply and exporters may face limitations in undertaking fresh export transactions until the outstanding compliance issues are resolved. Companies should therefore closely monitor ageing of export receivables.

Merchanting Trade Transactions (MTT)

Earlier for MTT transactions, the transactions should be profitable, close within 6 months and no third party is allowed. Now same restrictions has been removed. Now we can make payment to multiple foreign transactions and their may be one customer who pays to us. Please note that this requires pre-approval from AD Bank.

Conclusion

The new FEMA Export and Import Regulations represent a major shift towards an AD Bank-led compliance framework.  Hence companies should strengthen their internal controls and maintain close coordination with their AD Banks, as these institutions will now play a much larger role in administering FEMA compliance