RBI Revises FEMA Regulations to Boost Cross-Border Rupee Transactions
The Reserve Bank of India (RBI) has introduced significant updates to the Foreign Exchange Management Act (FEMA) regulations to enhance the use of the Indian rupee (INR) in cross-border trade and financial transactions. This move is aimed at reducing dependency on foreign currencies, particularly the US dollar, and promoting the rupee’s global acceptance.
The revised regulations now allow overseas branches of authorized dealer banks to open Indian rupee accounts for non-residents. These accounts will facilitate a wide range of permissible transactions, both current and capital, with Indian residents. Non-residents can also utilize funds in these accounts to settle transactions with other non-residents and invest in India, including Foreign Direct Investments in non-debt instruments.
To further ease international trade, the RBI has permitted Indian exporters to maintain foreign currency accounts abroad. These accounts can be used for receiving export proceeds and managing import payments, offering greater flexibility to Indian businesses in global trade operations.
The changes build on prior initiatives by the RBI, such as the introduction of Special Rupee Vostro Accounts (SRVAs) and collaborations with central banks of several countries, including the UAE and Indonesia. These steps are designed to encourage cross-border transactions in local currencies, thereby reducing exchange rate risks for Indian businesses.
The revisions are expected to strengthen India’s position in global trade, enhance the rupee’s credibility as an international currency, and provide businesses with more operational flexibility.
