Emails that are not meant for me: Liberalisation of FEMA regulations to encourage the use of Indian Rupee for cross-border trade

Dear Customer,

The Reserve Bank of India (RBI) has introduced key amendments to the Foreign Exchange Management Act (FEMA), 1999, in consultation with the Central Government, to further encourage the use of the Indian Rupee (INR) and local currencies for cross-border transactions. These changes aim to boost trade settlement in INR (and other local currencies of trading partner countries) to strengthen India's position in the global financial system.

Background:

•	In July 2022, RBI introduced the Special Rupee Vostro Account (SRVA) framework to promote INR-based trade settlements

•	A Memorandum of Understanding (MoU) was signed between RBI and central banks of the UAE, Indonesia and Maldives to facilitate cross-border transactions in local currencies

•	In December 2023, the Foreign Exchange Management (Manner of Receipt and Payment) Regulations were revised to enable cross-border transactions in all foreign currencies, including local currencies of trading partner countries and INR.

Key Highlights of the Revised Regulations:

Opening of INR Accounts by Overseas Branches of AD Banks:

Overseas Branches of Authorised Dealer (AD) Banks can now open INR accounts for a person residing outside India.

These accounts may be used for settlement of all permissible Current Account and Capital Account transactions with a person residing in India.

Expanded use of repatriable INR Accounts:

A person residing outside India can now settle bona fide transactions with another person residing outside India using balances in their repatriable INR accounts, including:

•	Special Non-Resident Rupee (SNRR) accounts

•	Special Rupee Vostro Accounts (SRVA).

Use of INR Balances for Foreign Investment:

Balances held in repatriable INR Accounts can now be used by a person residing outside India for making foreign investments, including Foreign Direct Investment (FDI) in non-debt instruments.

Accounts in Foreign Currencies for Indian Exporters:

Indian exporters are permitted to open accounts in any foreign currency overseas.

These accounts can be used for:

1)	Receiving export proceeds
2)	Using said export proceeds to pay for imports.

These amendments are expected to:


•	Enhance the use of INR for global trade settlements
•	Increase ease of doing business for Indian exporters and importers
•	Foster greater economic cooperation with trading partner countries.