India expands export-import flexibility and tightens bank oversight under new FEMA rules

The Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 take effect on October 1, extending realization periods and altering payment limits while giving AD-banks broader authority to approve extensions and third-party transactions.

Starting October 1, 2026, India’s Foreign Exchange Management (Export and Import of Goods and Services) Regulations introduce several changes aimed at increasing commercial flexibility while placing additional compliance duties on authorized dealer banks. Exporters invoicing or receiving payment in INR gain a twelve-month period to realize proceeds, up from nine months, and may obtain further extensions from their AD-bank.

If receivables remain unrealised after a year, future exports require full advance payment or an irrevocable letter of credit, and goods can be declared at zero value on the Export Declaration Form, bypassing the previous GR-waiver process. Importers now follow contract-specified payment periods instead of a fixed six-month limit, with standby LC thresholds set by individual bank policies; unadjusted advances trigger a requirement for unconditional standby LCs.

The rules also bring service exports (except software) under EDF reporting, allow single EDFs to cover a month’s services, and permit set-offs between export and import balances, including intra-group transactions. Merchant-trading transactions lose the nine-month completion cap, with a six-month gap limit between outward and inward remittances, subject to bank extensions. Overall, the framework grants greater trade leeway but intensifies bank-level scrutiny and reporting obligations.