Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 – Key Changes & Implications

Background and Regulatory Context

On 13 January 2026, the Reserve Bank of India (“RBI”) notified the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 (“2026 Regulations”) under the Foreign Exchange Management Act, 1999 (“FEMA”). The 2026 Regulations supersede the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015 (“2015 Regulations”) and introduce a consolidated regulatory framework governing both exports and imports of goods and services.

The Regulations will come into force on 1 October 2026. Acts done or omitted under the earlier regulations before this date continue to remain valid under the savings provision.

The objective of the 2026 Regulations is to:

1. consolidate and modernise FEMA provisions governing cross-border trade;
2. strengthen monitoring of export realisation and import payments;
3. align regulatory oversight with digital trade and evolving business models; and
4. enhance the role and accountability of authorised dealer banks in trade-related foreign exchange transactions.

Scope and Structure of the Regulations

The 2026 Regulations apply to:

1. exporters and importers of goods and services;
2. persons undertaking merchanting trade transactions; and
3. Authorised Dealer (“AD”) banks handling trade-related foreign exchange.

The Regulations comprehensively address:

1. declarations and documentation requirements;
2. timelines for realisation and repatriation of export proceeds;
3. import payment obligations and advance remittances;
4. third-party transactions and set-off arrangements;
5. merchanting trade; and
6. reporting through RBI’s digital monitoring systems.

Services are expressly defined to include software, covering non-physical and digital delivery modes.

Key Provisions & Regulatory Changes

Export Declarations and Documentation

1. Exporters of goods are required to furnish an Export Declaration Form (EDF) at the time of export.
2. For exports through Electronic Data Interchange (EDI) ports, the EDF is deemed to be submitted as part of the shipping bill.
3. Exporters of services must submit the EDF within 30 days from the end of the month in which the invoice is raised, subject to extensions granted by the AD bank.

Realisation and Repatriation of Export Proceeds

The Regulations prescribe uniform timelines for realisation and repatriation of export proceeds, including:

1. 15 months from the date of shipment (goods) or invoice (services);
2. 18 months where exports are invoiced or settled in Indian Rupees;
3. timelines governed by the underlying contract in case of project exports; and
4. specific treatment for warehouse exports.

AD banks are required to actively monitor compliance and may grant extensions where justified.

Unrealised Exports

Where export proceeds remain unrealised beyond one year from the due date (or any extended period), exporters are restricted to undertaking further exports only against:

1. full advance payment; or
2. an irrevocable letter of credit,

until compliance is regularised.

Set-off, Third-Party Transactions and Merchanting Trade

1. Set-off of export receivables against import payables is permitted subject to conditions and AD bank approval.
2. Third-party receipts and payments are allowed where the AD bank is satisfied as to the bona fides of the transaction.
3. Merchanting Trade Transactions are regulated, including a requirement that inward and outward remittances occur within prescribed timelines.

Import Payments and Advance Remittances

1. Import payments must be completed within the contractual period, subject to extensions permitted by AD banks.
2. Advance remittances for imports are permitted after due diligence by AD banks, with safeguards including possible requirements for standby letters of credit or guarantees.
3. Advance remittance for import of gold and silver continues to be prohibited, except as otherwise permitted under applicable law.

Reporting, Monitoring and Digital Oversight

The Regulations reinforce RBI’s digital monitoring through:

1. the Export Data Processing and Monitoring System (EDPMS); and
2. the Import Data Processing and Monitoring System (IDPMS).

AD banks are required to ensure timely data entry, monitoring, follow-up and closure of outstanding entries.

Enhanced Obligations on Authorised Dealer Banks

AD banks are required to:

1. maintain comprehensive internal policies and standard operating procedures for export, import and merchanting transactions;
2. disclose key features of such policies on their websites;
3. ensure reasonable and proportionate charges; and
4. refrain from levying penalties on customers for regulatory delays attributable to procedural issues.

Implementation & Firm Takeaway

The 2026 Regulations will take effect from 1 October 2026 and mark a significant consolidation of India’s FEMA trade regime, bringing greater regulatory clarity alongside enhanced oversight.
Exporters, importers, and merchant traders should use the transition period to review trade contracts and payment timelines, align export declarations and documentation with the new framework, and assess exposure to unrealised export proceeds.
Stakeholders should also engage proactively with authorised dealer banks on revised compliance and reporting requirements and update internal compliance systems to strengthen trade compliance and mitigate regulatory risk in cross-border transactions.