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Draft Foreign Exchange Management Regulations, 2024
Context: Reserve Bank of India (RBI) introduced Draft Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2024 to streamline export-import transactions.
Key Highlights of the draft regulation
- Exporters declare full export value (FXV) of goods/services to specified authority.
- FXV must be realised and repatriated to India within 9 months from date of shipment for goods and date of invoice for services.
- Authorised Dealer (AD)banks can extend repatriation period for reasonable and sufficient cause shown by the exporter.
- They can grant extensions to importers for delayed settlement of import payments or if overseas suppliers delay fulfilling obligations.
- AD banks can allow set-offs of export receivables against import payables for the same counterparties, but not across goods and services.
- They have to monitor progress of project exports and seek regular reports from exporters to facilitate corresponding payments.
- No advance remittance for gold and silver imports will be permitted without RBI approval, except for qualified jewellers importing through the India International Bullion Exchange.
- Exporters with outstanding export proceeds beyond 2 years will be ‘caution listed’ by AD banks in Export Data Processing and Monitoring System (EDPMS).
- AD banks must remove exporters from the caution list once all outstanding proceeds are realised.
- Caution listed exporters can only undertake exports against advance payment or irrevocable letter of credit.
Significance of the Draft Regulations
- Aims to enhance ease of doing business, benefiting small exporters & importers.
- Grants AD banks authority to offer faster and efficient services to their foreign exchange clients.
- Aligns with progressive liberalisation policies under the Foreign Exchange Management Act (FEMA) for foreign exchange transactions.
Foreign Exchange Management Act (FEMA), 1999:
- FEMA, which replaced the Foreign Exchange Regulation Act (FERA) of 1973, was implemented on June 1, 2000.
- It addresses procedures, formalities, and regulations concerning foreign exchange transactions in India.
- It classifies offences related to foreign exchange as civil offences.
- The Enforcement Directorate is FEMA’s head office, located in Delhi.
