RBI liberalises Fema rules to facilitate cross-border transactions

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In a bid to promote cross-border transactions in rupees and currencies of other countries, the Reserve Bank of India (RBI) has further liberalised the Foreign Exchange Management Act (FEMA).

 

On Thursday, the RBI said that domestic exporters will now be able to open accounts in any foreign currency overseas to settle trade transactions, including receiving export proceeds, and use these proceeds to pay for imports.

 

“In order to promote cross-border transactions in INR and local/national currencies, a further review of the existing regulations issued under FEMA, 1999, has been undertaken by the Reserve Bank in consultation with the Central Government,” the regulator said in a press release.

 

Under the revised norms, overseas branches of banks will be able to open rupee accounts for persons resident outside India for the settlement of all permissible current account and capital account transactions with persons resident in India.

 

In July 2022, to encourage greater use of the Indian rupee for trade transactions, an additional arrangement in the form of Special Rupee Vostro Account (SRVA) was introduced.

 

Several foreign banks have since opened SRVAs with banks in India. The RBI has also signed memorandums of understanding (MoUs) with the central banks of the United Arab Emirates, Indonesia, and Maldives to encourage cross-border transactions in local currencies.

 

Those residing outside India will be able to settle bona fide transactions with other persons resident outside India using the balances in their repatriable INR accounts, such as Special Non-Resident Rupee Account (SNRR) and SRVA, the RBI said.

 

The RBI has also allowed non-resident Indians to use such balances for foreign investments, including foreign direct investment (FDI) in non-debt instruments.