The Reserve Bank of India (RBI) has introduced new regulations under the Foreign Exchange Management Act, allowing Indian exporters greater flexibility in managing their foreign currency earnings. The Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) (Fifth Amendment) Regulations, 2025, effective from January 14, 2025, introduces significant changes for exporters.
Key Amendment: New Provisions for Exporters’ Foreign Currency Accounts
A new sub-regulation (CA) under Regulation 5 now permits Indian exporters to open, hold, and maintain Foreign Currency Accounts with banks outside India. This allows for greater control over their foreign exchange earnings and simplifies certain transactions.
Specific Provisions
Account Purpose: These foreign currency accounts can be used for:
- Receiving the full value of exports.
- Holding advance remittances received for future exports of goods or services.
Fund Utilization: Funds held in these accounts can be used for:
- Making payments for the exporter’s imports into India.
- Repatriating funds to India within a period not exceeding the end of the next month from the date of receipt, after adjusting for any forward commitments.
Impact of the Amendment
This amendment is expected to significantly benefit Indian exporters by:
- Streamlining Transactions: Simplifying the process of receiving export payments and making import payments.
- Improving Cash Flow Management: Providing greater control over foreign currency earnings and allowing for better cash flow management.
- Reducing Transaction Costs: Potentially reducing costs associated with currency conversions and international transfers.
- Enhancing Competitiveness: Making Indian exporters more competitive in the global market by providing greater operational flexibility.
