Mint Explainer: What RBI’s unified foreign exchange rules mean for India’s service exporters

By notifying a unified Foreign Exchange Management framework covering both exports and imports of goods and services, the Reserve Bank of India has attempted to simplify compliance, improve transparency and tighten monitoring of foreign exchange flows, particularly in services trade, while shifting more responsibility to banks.

The change matters because services now account for a growing share of India’s exports, yet remain underrepresented in the formal reporting architecture under Foreign Exchange Management Act (Fema). The new rules aim to close that gap without reintroducing centralised controls.

Services exports during April–December 2025 totalled $303.97 billion, while imports totalled $152.23 billion, resulting in a trade surplus of $151.74 billion. In the corresponding period of FY25, services exports stood at $285.53 billion and imports at $150.01 billion, leading to a services trade surplus of $135.52 billion.

In contrast, trade in goods continued to remain in deficit. During April–December 2025, merchandise exports stood at $330.29 billion, while imports rose to $578.61 billion, resulting in a trade deficit of $248.32 billion. Mint unpacks RBI's move and what it means for service exporters.

What has the RBI done?

The RBI has notified the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, replacing the existing export regulations of 2015. The new regulations, issued on 13 January, will come into effect in October 2026 after a nine-month transition period.

For the first time, exports and imports of both goods and services are governed under a single, consolidated regulation. Earlier, while goods exports were regulated through clearly defined forms, timelines and electronic systems, services exports were governed largely through RBI directions and bank-level practices, leading to inconsistencies in reporting and monitoring.

The new framework seeks to bring uniformity across trade transactions by placing all exports and imports within one regulatory structure.

What was the earlier system?

Under the earlier regime, goods exports followed a well-defined process, with shipment values declared through the export declaration form embedded in shipping bills at electronic data interchange ports. Import payments and advance remittances were governed by RBI directions, but were largely managed through banking practice rather than a single regulation.

Services exports, however, did not have a comparable declaration mechanism. Reporting timelines varied across banks, monitoring of outstanding dues was uneven, and regulatory visibility was limited.

As services exports expanded—particularly software and IT-enabled services—the gap between goods and services regulation became more pronounced. This fragmentation often resulted in compliance uncertainty and uneven enforcement across banks.

What is the key change in the new framework?

The most significant change is the formal inclusion of services exports within Fema’s reporting and monitoring system. Service exporters will now be required to file export declarations within 30 days of invoice issuance, bringing them closer to the discipline already applicable to goods exporters.

The framework allows flexibility through consolidated monthly filings and bank-approved extensions, recognising the nature of services transactions. Software exports have been explicitly classified as services, removing ambiguity around their treatment under Fema. Authorised dealer banks and software technology parks of India have been recognised as specified authorities for oversight. In effect, services exports move from a loosely governed space into a structured reporting system.

The rationale behind the RBI unifying goods and services trade rules

The overhaul follows two rounds of public consultation and nearly two years of deliberation. The RBI’s view is that India’s foreign trade policy, customs systems and sector-specific regulations are now sufficiently mature to support simpler and more decentralised regulation.

By unifying goods and services under one framework, the RBI aims to reduce regulatory overlap, align reporting standards and improve transparency. The move also reflects the growing importance of services exports in India’s external sector, making it necessary to track and monitor foreign exchange inflows more consistently. The objective is to ease compliance for genuine exporters while strengthening oversight in areas with higher risk.

Greater responsibility for banks

A key feature of the new framework is the shift towards bank-led regulation. Authorised dealer banks have been given greater responsibility to manage day-to-day trade-related matters based on their internal policies and assessment of the bona fides of transactions. Instead of seeking RBI approvals for routine matters, exporters will deal primarily with banks, which are closer to customers and transactions.

At the same time, banks are required to put in place detailed internal policies and standard operating procedures, disclose charges transparently, and actively monitor overdue export proceeds, increasing accountability at the bank level.

Has the RBI tightened rules on export proceeds?

Yes. While the RBI has eased compliance in several areas, it has tightened rules on delayed export proceeds. Exporters will continue to get 15 months to realise and repatriate export earnings for both goods and services. For exports invoiced or settled in Indian rupee, the allowed period has been extended to 18 months, giving exporters more time where payments are not in foreign currency.

However, if export payments remain unpaid for more than a year beyond the permitted period, including any extensions granted by banks, exporters will be allowed to make further shipments only against full advance payment or an irrevocable letter of credit. This is intended to discourage chronic delays and improve foreign exchange inflows.

What relief has been given to small exporters and MSMEs?

To reduce procedural burden, the RBI has allowed exporters and importers to close transactions of up to ₹10 lakh in the export and import monitoring systems through self-declaration. Quarterly bulk submissions will be permitted for such transactions, easing documentation requirements for MSMEs and small service exporters.

The regulations also formally recognise flexibilities that earlier existed through circulars, such as under-realisation of export value, set-off of export receivables against import payables, and third-party receipts and payments, subject to bank satisfaction on transaction genuineness.

What changes on the import side?

Banks have been tasked with closer monitoring of delayed import payments and advance remittances that do not translate into actual imports. In cases of repeated defaults, stricter safeguards such as standby letters of credit may be triggered.

Merchanting trade transactions must now be completed within six months between inward and outward remittances, although banks retain the discretion to grant extensions. Advance remittances for imports remain permitted, but advance payments for gold and silver imports continue to be prohibited.

Expert view

“The RBI’s move reflects a shift towards recognising services as a core driver of India’s external sector rather than a peripheral activity," said Abhash Kumar, trade expert and assistant professor of economics at Delhi University.

“Formal reporting of services exports is expected to improve data quality and policy visibility, which has remained limited so far despite the sector’s growing contribution to foreign exchange earnings."

He added that clearer timelines and consequences for delayed payments could help exporters strengthen contract discipline with overseas clients, while the flexibility built into the framework should ensure that normal business flows are not disrupted.