RBI Tweaks Foreign Exchange Management (Manner of Receipt and Payment) Regulations
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- Last Updated on 23 December, 2023
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Notification No. FEMA 14(R)/2023-RB., Dated 20.12.2023
The Reserve Bank of India vide Notification No. FEMA 14(R)/2023-RB. Dated 20.12.2023 has introduced Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023.
The newly introduced regulations will replace the existing Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016. As per regulation 3 of newly introduced regulations, unless permitted by RBI or allowed by the Act, Rules or Directions under the FEMA, no person in India can make payment or receive payment from a person resident outside India.
The regulation further provides that all the receipts and payments between a person resident in India and a person resident outside India shall be made through an Authorised Bank or Authorised Person. Regulation 3 of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023, has bifurcated the transactions for receipt and payment into two categories:
(a) Trade Transactions
(b) Transactions other than Trade Transactions
1. Manner of receipt and Payment in case of Trade Transactions
The receipt and payment for export to or import from the following countries in respect of eligible goods and services shall be as under:
1.1. Receipt and Payment from Nepal and Bhutan
The receipt/payment for export to or import from Nepal and Bhutan of eligible goods and services shall be in Indian Rupees however, in case of exports from India receipts towards the amount of the export may be in foreign currency where the importer in Nepal has been permitted by the Nepal Rashtra Bank to make payment in foreign currency.
1.2. Receipt and payment from member Countries of ACU, other than Nepal and Bhutan
The receipt/payment for export to or import from Member Countries of ACU, other than Nepal and Bhutan of eligible goods and services shall be made through ACU mechanism or as per the directions issued by the Reserve Bank to authorised dealer from time to time.
However, in case of imports where the goods are shipped to India from a member country of the ACU (other than Nepal and Bhutan) but the supplier is a resident of a country other than a member country of the ACU, the payment may be made in INR or in any foreign currency.
Explanation: The expression ‘ACU’ (Asian Clearing Union) shall have the same meaning assigned to it under Article I of the ACU agreement and the ACU mechanism shall be construed accordingly
1.3. Receipt and Payment from countries other than members of ACU
The receipt/payment for export to or import from countries other than member countries of ACU of eligible goods and services shall be made In Indian Rupees or in any foreign currency.
2. Transactions other than trade transactions
For transactions outside of trade activities, all receipts and payments from Nepal and Bhutan are to be conducted in Indian Rupees. However, in the case of overseas investments in Bhutan, payments may also be made in foreign currency.
Whereas, for transactions involving countries other than Nepal and Bhutan, payments can be made in either Indian Rupees or any foreign currency.
Further, for any current account transaction, excluding trade transactions, between a resident in India and a person visiting from outside India, payments and receipts in India must be made solely in Indian Rupees.
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