Research and Articles

• The 2026 Regulations consolidate the export and import framework into a single, principle-based regime covering goods, services, and software.

• A clear shift is introduced from prescriptive, RBI-driven controls to a decentralised model anchored on AD Bank’s discretion and oversight.

• Compliance architecture moves towards invoice-linked reporting (via EDF) and contractual timelines, replacing rigid and timeline-based requirements.

Background

The Reserve Bank of India (“RBI”) has notified the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026¹ (“2026 Regulations”), to come into force on October 1, 2026. The 2026 Regulations supersede the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015² (“2015 Regulations”), two Master Directions³, and over 167 circulars⁴, replacing them with a single, principle-based, consolidated instrument covering both exports and imports of goods, services, and software.

India’s earlier regime operated through a fragmented, multi-layered structure, resulting in compliance complexity and significant RBI involvement across instruments. The rationalisation process began with two rounds of public consultation. The RBI published draft Export and Import Regulations and Directions on July 2, 2024⁵, inviting stakeholder comments. Following receipt and review of representations, a revised draft was circulated on April 4, 2025⁶. The 2026 Regulations, notified on January 13, 2026, reflect the RBI's considered response to those representations.

Substantively, the 2026 Regulations aim to: (i) consolidate exports and imports under a single instrument; and (ii) liberalise operations by expanding Authorised Dealer Banks’ (“AD Banks”) discretion, rationalising timelines, and simplifying compliance. However, the actual impact will depend on how AD Banks implement their internal policies and Standard Operating Procedures (“SOPs”).

Analysis of Key Changes

First-Ever Integrated EXIM Framework

For the first time under the Foreign Exchange Management Act, 1999 (“FEMA”), a single set of regulations governs both export and import of goods, services, and software. Earlier, exports were covered under the 2015 Regulations, while imports were largely governed through Master Directions and circulars. As a result, transactions involving both export and import legs (such as set-offs, back-to-back arrangements, and certain group structures) had to comply with two parallel frameworks. The 2026 Regulations address this gap by creating a unified framework.

While the primary focus continues to remain on export compliance, the inclusion of import-related provisions brings greater alignment. That said, no separate declaration mechanism has been prescribed for imports. Instead, compliance is driven through contractual payment timelines, oversight by AD Banks, and reporting and closure requirements under the Import Data Processing and Monitoring System (“IDPMS”).

The Single Export Declaration Form (“EDF”)

Under the erstwhile framework, Indian exporters were required to navigate two distinct declaration regimes: the EDF filed with Customs for goods exports, and the Software Export Declaration (“SOFTEX”) form, (introduced specifically for software exports), which required certification from either the Software Technology Parks of India (“STPI”) or the Special Economic Zone (“SEZ”) Development Commissioner. Service exports other than software had no specific declaration obligation.

The 2026 Regulations replace this fragmented approach with a single unified EDF applicable to all exports of goods, services, and software. The statutory treatment of software as a sub-category of 'services' is now expressly clarified.

The significance for the technology sector is considerable. By recognising AD Banks as the 'Specified Authority' for software exports, the 2026 Regulations effectively make STPI certification optional. IT and ITeS companies that previously relied on STPI for export certification now have the choice to route compliance through their AD Bank, simplifying the compliance chain and reducing the risk of delays attributable to STPI processing. Service exporters exporting to multiple recipients in a month may submit a single consolidated EDF, materially reducing the filing burden for volume exporters.

Export Proceeds Realisation Timelines 

The 2026 Regulations codify the 15-month realisation period into the statutory instrument itself, having been previously introduced via a Master Direction amendment in November 2025.

The starting point for calculating this period varies depending on the nature of the export –

• Goods: 15 months from the date of shipment

• Goods exported to an overseas warehouse: 15 months from the date of sale from the warehouse

• Services: 15 months from the date of invoice

• Project exports: As per the terms of the project contract

• INR-Settled Exports: A materially longer 18-month window applies where exports are invoiced and/or settled in Indian Rupees.

The 2026 Regulations introduce a statutory consequence for persistent non-realisation that was absent from the 2015 Regulations, where export proceeds remain unrealised for over one year from the due date of realisation (or any AD Bank-extended date), the exporter's future exports will be permissible only against (i) full advance payment, or (ii) an irrevocable Letter of Credit (“LoC”). This effectively acts as a conditional restriction on operations and, in practice, limits access to credit for exporters who do not manage their receivables properly.

Import Payment Timelines

One of the most commercially significant changes under the 2026 Regulations is the removal of the fixed 6-month payment window for normal imports. Under the erstwhile framework, import payments were required to be made within 6 months of shipment, with extensions granted by AD Banks on a case-by-case basis, often leading to uncertainty and administrative friction in longer-cycle transactions (e.g., capital equipment procurement, deferred payment structures).

The 2026 Regulations align the payment timeline with the period specified in the underlying contract, effectively replacing the statutory 6-month ceiling with commercial terms. AD Banks retain the authority to grant extensions where required, recognising that payment cycles vary across sectors and counterparties. However, compliance monitoring is more stringent wherein the IDPMS entries are required to be closed within the contractual timeline. If the import is not completed or the advance is not repatriated, future advance remittances will be allowed only against a standby LoC or bank guarantee from a reputable international bank, or an AD Bank backed by such counter-guarantee.

Advance Payments and Receipts (Import and Export)

From the import’s perspective, the erstwhile USD 200,000 threshold (above which a bank guarantee or standby LoC as mandatory for import advance remittances) has been replaced by a threshold-setting mechanism delegated entirely to AD Banks. Each AD Bank will prescribe its own threshold for requiring collateral. The practical implication that the thresholds may vary across banks, leading to potential inconsistency for importers. Advance remittance for gold and silver continues to be prohibited.

On the export side, AD Banks are similarly empowered to set internal thresholds for advance receipts, along with KYC/AML and documentation requirements. The earlier requirement to complete exports within 3 years from receipt of advance does not appear in the 2026 Regulations. It remains to be seen whether this would be reintroduced through the AD Banks-level SOPs.

Interest payable on export advances or delayed import payments (if any) should remain within the all-in-cost ceiling prescribed for trade credits under the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 i.e., benchmark of 6-month LIBOR or equivalent for the respective currency + 250 basis points per annum. Further, both advance receipts and export realisation are to be routed through a single AD Bank for a transaction, with flexibility to change the bank upon intimation. This is a useful operational flexibility that was previously unclear.

Set Off of Export Receivables Against Import Payables

The 2026 Regulations significantly expand the set-off mechanism. Under the erstwhile framework, set off between goods export receivables and services import payables (and vice versa) was not permitted, an asymmetry that created artificial friction in group treasury arrangements where the same overseas counterparty was both a buyer and a supplier.

This restriction has now been removed. AD Banks may now permit set-off of export receivables against import payables with the same overseas buyer/supplier, or their overseas group or associate companies, regardless of whether the underlying transactions relate to goods or services. The set-off should be completed within the prescribed realisation period or any AD-approved extension. This is a meaningful liberalisation for group companies with back-to-back trade flows.

Third-Party Receipts and Payments

Third-party payment arrangements, where export proceeds are received from, or import payments are made to, a party other than the direct contractual counterparty, are now permissible under AD Bank powers, subject to the AD Bank being satisfied as to the bona fides of the transaction and the availability of supporting documentary evidence. The previous framework imposed rigid restrictions, creating compliance challenges for multinational groups operating shared services centres or centralised treasury functions.

Reduction in Invoice Value / Non-Realisation

AD Banks are now authorised to permit reduction in the realisation of export invoice value (including full non-realisation) on the basis of their satisfaction with the bona fides of the transaction and supporting documentation. For transactions where the export value per invoice does not exceed INR 1 million (per shipping bill or invoice, as applicable), a simple self-declaration from the exporter is sufficient. The previous regime imposed multiple approval categories and percentage caps on write-off powers, the simplified, principles-based approach is considerably more workable for small exporters managing disputed or irrecoverable receivables.

Merchanting Trade Transactions (“MTTs”)

Merchants or trading houses that buy goods from one foreign country and sell them to another, without the goods entering Indian territory (i.e., MTTs) faced a two-tier time constraint under the erstwhile framework: (i) the entire MTT had to be completed within 9 months, and (ii) the foreign exchange outlay (the gap between import payment and export receipt) could not exceed 6 months. Third-party receipts or payments were generally not permitted.

The 2026 Regulations retain the 6-month limit on the forex outlay period but remove the 9-month outer limit for overall MTT completion. Third-party receipts and payments are now permitted with AD Bank’s approval. AD Banks are required to maintain a simplified internal framework, verify the genuineness of transactions, ensure Export Data Processing and Monitoring System (“EDPMS”) / IDPMS compliance, and may extend the 6-month period in genuine cases.

The removal of the 9-month ceiling is a commercially important change. Complex global supply chain transactions, particularly in commodities and capital, can have commercial cycles that exceed 9 months at the overall level, even where the forex outlay is managed within 6 months. The revised framework accommodates this reality. The condition that MTTs should be supported by back-to-back contracts and shipping documents, and that payments should generally flow directly between the overseas buyer and seller, continues to apply.

For eligibility purposes, MTTs should be undertaken in conformity with the Foreign Trade Policy and goods (other than those restricted from trading) should not enter India during the transaction.

Project Exports: PEM Rules Absorbed into Main Framework

The Memorandum of Instructions on Project and Service Exports (PEM Rules), 2014 will be repealed from October 1, 2026, with project export provisions now integrated into the 2026 Regulations. The core framework remains largely unchanged i.e., project exports continue to be contract-based and subject to AD Bank (or EXIM Bank) oversight, including verification of genuineness. Exporters may also deploy temporary overseas surpluses into short-term investments (up to 1 year), under AD Bank monitoring.

INR Trade Settlement: Formalisation of the Rupee Vostro Framework

The Special Rupee Vostro Account mechanism, introduced in 2022 for INR trade settlement, is now formally included in the 2026 Regulations. The extended 18-month realisation period for INR exports reflects the push towards rupee internationalisation. Bringing this framework into the new regulations gives it stronger legal backing, replacing reliance on circulars. This should provide greater comfort to exporters and encourage wider adoption of INR-based trade arrangements.

Conclusion

The 2026 Regulations are described correctly as a liberalisation of the EXIM framework. Timelines have been extended, set-off flexibility has expanded, third-party payments are now accommodated, and onerous write-off categories have been simplified. However, the shift is better viewed as a transfer of discretion from RBI to AD Banks. The true extent of liberalisation for any given exporter or importer therefore will depend entirely on how their AD Bank chooses to exercise its discretion and this will vary across banks. As a result, conservative banks may continue to adopt restrictive positions, while others may offer greater flexibility.

The 2026 Regulations will come into force on October 1, 2026. The AD Banks’ internal policies and SOPs through which this liberalisation will operate are awaited. The intervening period is intended to enable banks to formulate and publish these policies. Accordingly, the practical outcome for businesses will depend significantly on these SOPs, and businesses should engage with their AD Banks during this phase to understand evolving positions and highlight operational requirements.

Overall, the 2026 Regulations mark a significant structural reform since the enactment of FEMA itself consolidating a fragmented framework into a single, principle-based regime and improving clarity and predictability.

Dhairya Jain and Chandrashekhar K
You can direct your queries or comments to the authors.

¹The Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026.Available here. (Accessed on 24^th April 2026)

²The Foreign Exchange Management (Export of Goods & Services) Regulations, 2015.  Available here. (Accessed on 24^th April 2026)

³Master Direction – Export of Goods and Services. Available here and Master Direction – Import of Goods and Services. Available here. (Accessed on 24^th April 2026)

⁴A.P. (DIR Series) circulars issued from the year 2000 onwards.

⁵Draft Directions on Export and Import of Goods and Services. Available here. (Accessed on 24^th April 2026.)   

⁶Draft Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2025. Available here. (Accessed on 24^th April 2026)