RBI Draft Directions on Export and Import Regulations

The Reserve Bank of India (RBI) has proposed new directions regarding the export and import of goods and services, issuing the draft Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2025, for stakeholder feedback.

Key Points of the Draft Regulations

• The RBI has launched the Platform for Regulatory Application, Validation and Authorisation (PRAVAAH) for online submission of regulatory authorizations and approvals.
• Authorized Dealers (ADs) are required to adhere to existing Foreign Trade Policy guidelines and government directives for export and import transactions.
• ADs should report all references to the RBI through the PRAVAAH portal and inform the Directorate of Enforcement about any suspicious transactions.

AD Requirements

• Within six months, ADs must develop an internal policy for managing transactions related to export and import, including grievance handling.
• The monitoring of payments will continue through the Export Data Processing and Monitoring System (EDPMS) and Import Data Processing and Monitoring System (IDPMS).
• Realization timelines for export proceeds and remittances for imports remain largely unchanged, with ADs having the authority to grant extensions.

Merchanting Trade Transactions (MTT) and Specific Conditions

• The time for the period between outward and inward remittances in MTT is extended to six months.
• Exports are allowed only against full advance or irrevocable letter of credit for exporters with unrealized export outstanding over ₹25 crore.
• Importers with unmaterialized advance payments exceeding ₹25 crore must secure an irrevocable standby letter of credit or bank guarantee for further advances.

Implications and Market Reactions

• The RBI aims to avoid micro-managing, giving ADs discretion over several regulatory aspects, potentially leading to varied treatment of similar transactions by different ADs.
• ADs are instructed to levy reasonable transaction handling charges and avoid penalties for regulatory delays.
• Exporters are relieved as the draft does not require surrendering export incentives for shortfalls in export proceed realizations.
• However, ADs are expected to monitor all import and export transactions, which may be contentious.
• SEZ units and service providers face new documentation requirements, including submitting export declaration forms and invoice copies to specified authorities.