RBI updates Fema regulations to boost cross-border rupee transactions

The RBI has updated FEMA regulations to encourage cross-border INR transactions, including settling trade, investments, and export payments, with foreign currency accounts allowed

To promote cross-border transactions in rupees and other local or national currencies, the Reserve Bank of India (RBI), in collaboration with the central government, has reviewed the current regulations under Foreign Exchange Management Act, 1999, the central bank said in a press release on Thursday.

 

As a result, the following amendments have been made to the existing FEMA guidelines:

 

>Authorised dealer banks' overseas branches can now open INR accounts for residents outside India, facilitating the settlement of all permissible current and capital account transactions with residents in India.

 

>Residents outside India can use the balances in their repatriable INR accounts, such as the Special Non-resident Rupee Account (SNRA) and SRVA, to settle legitimate transactions with other non-resident individuals.

 

>Residents outside India can use their repatriable INR account balances for foreign investments, including Foreign Direct Investment (FDI) in non-debt instruments.

 

>Indian exporters are now allowed to open foreign currency accounts abroad to settle trade transactions, receive export proceeds, and use those funds to pay for imports.

 

To further encourage the use of the Indian rupee (INR) in international trade, the Special Rupee Vostro Account (SRVA) was introduced in July 2022. Several foreign banks have since established SRVAs with Indian banks. Additionally, the RBI has signed MoUs with the central banks of the UAE, Indonesia, and the Maldives to promote cross-border transactions in local currencies.

 

In December 2023, the Foreign Exchange Management (Manner of Receipt and Payment) Regulations were updated to enable cross-border transactions in all foreign currencies, including the local currencies of trading partner countries, as well as the INR.