FEMA regulations to reshape India’s EXIM compliance regime

India’s foreign exchange regime governing cross-border trade is undergoing its most significant structural reform in decades. By FEMA Notification No. 23, dated 13 January 2026, the Reserve Bank of India (RBI) has notified the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, effective 1 October 2026.

For the first time, both exports and imports are governed under a single, consolidated regulatory instrument, superseding the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015, and the dispersed import-related directions issued by the RBI over the years.

The 2026 regulations draw their authority from sections 7, 8, 10(6), and 47(2) of the Foreign Exchange Management Act, 1999 (FEMA). These provisions collectively oblige exporters to furnish declarations and realise proceeds, require repatriation of foreign exchange due to Indian residents, empower the RBI to direct authorised dealer banks (AD banks), and confer general regulation making powers. By operationalising these substantive obligations within a single instrument, the 2026 regulations reduce regulatory fragmentation and enhance legal certainty for trade participants.

Key FEMA 2026 export flexibilities

Regulation 3 introduces a formal export declaration form (EDF) requirement for service exporters, to be filed within 30 days from the end of the month in which the relevant invoice is raised. Consolidated declarations covering multiple invoices in the same month are permitted. This places service exports – particularly in the information technology, software and consulting sectors – on a compliance footing comparable to goods exports, a change of material significance for India’s largest export segment.

Regulation 5 extends the period for realisation and repatriation of export proceeds to 15 months from the date of shipment (for goods) or invoice (for services). Where the transaction is invoiced and settled in Indian rupees, the permissible period is further extended to 18 months. This provides exporters with greater commercial flexibility and aligns the Indian framework with prevailing international trade practices.

Regulation 7 expressly permits AD banks to allow set-off of export receivables against import payables involving the same overseas counterparty, including its group or associate entities. Regulation 8 permits third-party receipts and payments, subject to AD bank satisfaction as to the bona fides of the underlying transaction. Together, these provisions offer a clear statutory basis for settlement and treasury structures widely used by multinational enterprises – an area where regulatory ambiguity had previously been a concern.

AD banks drive compliance oversight

The 2026 regulations place AD banks at the centre of compliance architecture. Their responsibilities span receiving declarations, monitoring realisation and payment timelines, approving reductions in export proceeds, permitting set-off arrangements, and maintaining export data processing and monitoring system (EDPMS) and import data processing and monitoring system (IDPMS) records.

AD banks are additionally required to adopt documented internal policies and standard operating procedures, including defined approval hierarchies, grievance redressal mechanisms, and website disclosures. This signals a deliberate move towards principles-based regulation, vesting greater discretion and accountability in authorised intermediaries.

The regulations preserve the existing compliance mechanism for special economic zones, with the Development Commissioner continuing as the specified authority for export declarations, ensuring consistency with the Special Economic Zones Act, 2005, and avoiding overlapping supervisory arrangements.

RBI modernises trade forex rules

The 2026 regulations mark a meaningful modernisation of India’s trade-related foreign exchange framework. By consolidating export and import rules, extending realisation timelines, formalising service export declarations and strengthening AD bank governance, the RBI has introduced a more coherent and commercially responsive regime.

The lead time, until 1 October 2026, provides businesses with an opportunity to align internal systems accordingly.

The framework’s ultimate effectiveness will, however, depend on consistent implementation by AD banks and pragmatic oversight by the RBI.

Aman Avinav is a partner (dispute resolution, white-collar crimes & investigation) at Phoenix Legal