RBI’s New FEMA Regulations on Export & Import of Goods and Services (2026): A Detailed Legal and Practical Analysis

The Reserve Bank of India has ushered in a landmark reform in India’s foreign exchange regulatory framework by notifying the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 (FEMA 23(R)/2026-RB) on 13 January 2026. These Regulations, effective 1 October 2026, replace the decade-old FEMA (Export of Goods & Services) Regulations, 2015 and establish a single, unified, principle-based regime governing exports and imports of goods and services.

This reform is not merely incremental—it represents a structural shift in how cross-border trade transactions are regulated, monitored, and enforced in India.

1. Background and Regulatory Context

Under the 2015 framework, export and import compliances were governed through:

Separate regulations for exports,
Multiple Master Directions,
Numerous RBI circulars issued over time.

This resulted in fragmentation, interpretational challenges, and procedural rigidity, particularly for MSMEs and service exporters.

The 2026 Regulations consolidate this landscape into one cohesive statute, backed by updated Master Directions, reflecting RBI’s stated objectives of:

Ease of doing business,
Digital-first compliance,
Faster decision-making through empowered Authorised Dealer (AD) banks.

2. Unified Regulation: Exports and Imports Under One Roof

For the first time under FEMA, exports and imports of both goods and services are governed together. This includes:

Goods,
Services (explicitly including software),
Project exports,
Merchanting Trade Transactions (MTT),
INR-denominated trade settlement.

Why this matters:
Businesses now operate under a single compliance logic, reducing duplication and inconsistencies that earlier existed between export and import rules.

3. Export Proceeds Realisation: Certainty Through Uniform Timelines

What has changed?

Uniform 15 months realisation period for:
- Goods (from date of shipment),
- Services (from date of invoice).
18 months where exports are invoiced or settled in INR.
Project exports governed by contractual payment terms, subject to AD bank monitoring.

Regulatory discipline retained

If export proceeds remain unrealised beyond one year from the due date or extended period, the exporter can undertake further exports only against full advance payment or irrevocable Letter of Credit (LC).

Impact:
This balances flexibility with enforcement, encouraging timely repatriation without excessive RBI intervention.

4. Single Export Declaration Form (EDF): A Major Compliance Simplification

One of the most significant reforms is the introduction of a single, unified Export Declaration Form (EDF) for:

Goods,
Services,
Software exports.

Key mechanics

Goods (EDI ports): EDF deemed filed as part of the shipping bill.
Services:
- EDF to be filed within 30 days from month-end of invoicing.
- Monthly consolidated EDF permitted for multiple service exports.
- For services other than software, EDF can be filed on or before receipt of payment.

Why this is important:
Service exporters—historically operating in a regulatory grey area—now have clear, codified reporting obligations.

5. Enhanced Role of Authorised Dealer (AD) Banks

A defining feature of the 2026 Regulations is the shift to a bank-led compliance model.

AD banks are now empowered to:

Grant extensions for export realisation and import payments,
Permit reduction or write-off of export value based on commercial rationale,
Allow set-off of export receivables against import payables, including group entities,
Approve third-party receipts and payments for genuine transactions.

Simultaneously, AD banks are required to:

Establish detailed internal policies and SOPs,
Clearly define delegation of powers,
Maintain escalation and grievance redressal mechanisms,
Disclose key aspects of these policies publicly.

Practical effect:
Regulatory discretion moves closer to the transaction, reducing turnaround time while increasing responsibility on banks.

6. Advance Payments and Trade Credit Rationalisation

Exports

AD banks may set internal thresholds for advances.
SBLCs or Bank Guarantees may be required beyond prescribed limits.
Interest on advances capped at the all-in-cost ceiling for trade credit.

Imports

Advance remittances generally permitted.
Absolute prohibition on advance payment for import of gold and silver.
If imports do not materialise, advances must be repatriated, failing which future advances require strong guarantees.

7. Merchanting Trade Transactions (MTT): From Complexity to Clarity

The earlier MTT regime was widely viewed as overly complex. The 2026 Regulations simplify it by:

Imposing a six-month cap between inward and outward remittances,
Allowing third-party payments with AD approval,
Mandating EDPMS/IDPMS reporting for both legs of the transaction.

Outcome:
India-based trading entities gain operational flexibility without compromising traceability.

8. Digital Reporting and Small-Value Transaction Relief

All export, import, and merchanting transactions must be reported through:

EDPMS / IDPMS, and
Foreign Exchange Transactions Electronic Reporting System (FETERS).

Key relief

Transactions up to ₹10 lakh may be closed based on self-declaration, without supporting documents.

This is a strong signal of RBI’s intent to reduce friction for small businesses while focusing regulatory energy on higher-risk transactions.

9. INR Trade Settlement: Structural Recognition

The Special Rupee Vostro mechanism, earlier implemented via circulars, is now formally embedded in the Regulations.

INR-settled exports enjoy 18-month realisation timelines.
Reinforces India’s strategic push towards rupee internationalisation.

10. Effective Date and Transition Planning

Effective from: 1 October 2026
Transactions prior to this date continue under the earlier framework.

Businesses have a critical transition window to realign systems, contracts, and internal controls.

Conclusion: A Structural Reset, Not Just a Regulatory Update

The FEMA 2026 Regulations represent a paradigm shift—from fragmented, rule-heavy compliance to a principle-based, digitally monitored, and bank-driven framework.

While the Regulations significantly enhance flexibility and ease of doing business, they also: