Top Stories RBI relaxes FEMA norms to promote Cross Border Transactions The RBI also signed Memoranda of Understanding (MoUs) with the central banks of the United Arab Emirates, Indonesia, and the Maldives to encourage cross-border transactions in local currencies By Manu Sharma – On January 18, 2025 12:49 pm – 2 mins read The Reserve Bank of India (RBI) has introduced a series of liberalized measures to enhance the use of the Indian Rupee (INR) and local/national currencies for cross-border transactions, including allowing Indian exporters to open accounts in any foreign currency overseas for settlement of trade transactions, including receiving export proceeds and using these proceeds to pay for imports.
Background and Initial Steps In July 2022, the RBI took its first significant step by introducing Special Rupee Vostro Accounts (SRVA) to facilitate trade settlements in INR. This initiative saw participation from several foreign banks, which opened SRVAs with Indian banks. In December 2023, the Foreign Exchange Management (Manner of Receipt and Payment) Regulations were revised to enable transactions in all foreign currencies, including INR and the local currencies of trading partners. Redefine Finance: Master the Art of Investment Banking – Click here to Register New Liberalized FEMA Regulations The latest review of FEMA regulations, undertaken in consultation with the Central Government, has resulted in significant changes aimed at further promoting cross-border transactions. The key amendments include: 1. Overseas INR Accounts: Overseas branches of Authorized Dealer (AD) banks are now permitted to open INR accounts for persons residing outside India. These accounts can be used to settle all permissible current and capital account transactions with residents in India. 2. Transactions Between Non-Residents: Persons residing outside India can now settle bona fide transactions with other non-residents using balances in their repatriable INR accounts, such as Special Non-resident Rupee Accounts and SRVAs. Redefine Finance: Master the Art of Investment Banking – Click here to Register
3. Investment Opportunities: Balances held in repatriable INR accounts can be utilized by non-residents for foreign investments, including Foreign Direct Investment (FDI) in non-debt instruments. 4. Export Proceeds for Trade Settlements: Indian exporters are now allowed to open accounts in any foreign currency overseas. These accounts can be used for trade settlement purposes, including receiving export proceeds and using these funds for import payments. These measures are expected to reduce currency conversion costs, and enhance liquidity in the INR ecosystem. By allowing greater flexibility in foreign currency transactions and expanding the scope of usage of Indian Rupee, the RBI aims to strengthen India’s position in global trade and attract foreign investment, especially following The move also tries to minimize reliance on dominant international currencies for trade and financial settlements.
Additionally, the relaxation of FEMA norms complements India’s goal of boosting economic ties with its neighbors and key trading partners. Redefine Finance: Master the Art of Investment Banking – Click here to Register To implement these changes, the RBI has issued the following amended regulations: – Foreign Exchange Management (Deposit) (Fifth Amendment) Regulations, 2025 – Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) (Fifth Amendment) Regulations, 2025 – Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) (Third Amendment) Regulations, 2025