Export Regulations in India

When foreign buyers pay for goods in India using credit cards, AD Category I banks release the EDF (duplicate) upon receiving funds in their Nostro account or upon receiving a certificate from the Credit Card servicing bank in India confirming receipt of the equivalent amount in foreign exchange.

Export-related payments can be processed through online payment gateways, as outlined in Notification No.CO.DPSS.POLC.No.S-786/02-14-008/2023-24 dated October 31, 2023.

Participating countries in the Asian Clearing Union can settle transactions in ACU Dollar, ACU Euro, or ACU Japanese Yen, equivalent to one US Dollar, one Euro, and one Japanese Yen, respectively.

AD Category I banks are permitted to open and maintain ACU Dollar, ACU Euro, and ACU Japanese Yen accounts with correspondent banks in other participating countries. All eligible payments must be settled through these accounts.

Trade transactions between India and Myanmar can be settled in any freely convertible currency, bypassing the ACU mechanism.

Due to difficulties with payments to and from Iran, all eligible current account transactions, including trade transactions, are settled in any permitted currency outside the ACU mechanism until further notice.

All eligible current account transactions, including trade transactions with Sri Lanka, can be settled in any permitted currency outside the ACU mechanism until further notice.

The ACU mechanism was established to facilitate transactions and settlements among participating countries. It offers alternative currencies (ACU Dollar, ACU Euro, ACU Japanese Yen) for settlements.

Exports and imports can be priced and billed in Indian Rupees (INR).

The exchange rate between trading countries' currencies is determined by the market, not fixed.

Indian banks can open special accounts for foreign banks (Vostro accounts) to facilitate INR payments.

Indian importers pay for imported goods and services in INR directly to the foreign bank's Vostro account.

Indian exporters receive their earnings in INR from the foreign bank's Vostro account.

Trade transactions using this system are subject to standard documentation and reporting requirements.

Banks from both countries can agree on trade-related documents, like Letters of Credit, within the global framework of trade standards.

Indian exporters can receive advance payments in INR for future exports, subject to certain conditions.

When a third party is involved in a trade transaction (like Sudan, etc.), payments may be received from an Open Cover Country.

The invoice must clearly state that the payment is to be made to a specific third party. This information is also required in other documents like the Bill of Entry.

Exports can be settled in currencies that don't have a direct exchange rate with the Indian Rupee. This requires certain conditions to be met by the AD banks and the exporter.

While settling export transactions in non-direct exchange currencies, the exporter must be a customer of the AD bank and the beneficiary must agree to receive payment in their currency instead of the original invoice currency.

The AD bank must verify the legitimacy of the transaction and ensure that the counterparty (exporter or importer) is not from a country identified as high risk or non-cooperative by the FATF.

International trade transactions can now be settled in INR, which promotes Indian exports and supports global trading interests in the INR.

AD banks need prior approval from the Reserve Bank of India before settling export/import transactions in INR.

The new mechanism for INR settlements aims to boost global trade with India and increase international acceptance of the INR.

A temporary foreign currency account that can be opened by participants in international exhibitions/trade fairs held outside India, allowing them to deposit and operate funds earned during the event.

Exporters with a good track record can apply to open a foreign currency account with authorized dealer (AD) banks in India or abroad, subject to conditions.

An Indian company can establish and maintain a foreign currency account with a bank outside India in the name of its overseas office/branch, primarily used for business operations.

A unit operating within a Special Economic Zone (SEZ) can open and maintain a foreign currency account with an authorized dealer (AD) bank in India, subject to specific regulations.

This regulation (5(E)(5)) governs the temporary Foreign Currency Account for participants in international exhibition/trade fair.

This regulation (5(B)) governs the establishment and maintenance of foreign currency accounts by Indian entities in the name of their overseas offices.

This regulation (4(D)) governs the operation and maintenance of foreign currency accounts for units located in a Special Economic Zone (SEZ).

Authorized Dealers (AD) are banks authorized by RBI to deal in foreign exchange, facilitating international transactions like opening foreign currency accounts.

A type of foreign currency account available to Indian residents who export projects or services. This account can be held with a bank outside or within India and is subject to the Memorandum PEM.A.5 terms and conditions.

Indian firms and companies involved in the diamond and gemstone trade with a minimum 2-year track record and an average annual turnover of Rs. 3 crores or more can open this account.

Firms and companies eligible for a DDA are allowed to open a maximum of five such accounts with their authorized dealer (AD) banks.

To open a DDA account, an eligible firm or company must submit an application in the prescribed format to their AD Category – I banks.

A type of foreign currency account available to Indian residents for holding foreign currency earned from exports.

An Indian resident may open an EEFC account with a bank categorized as an AD Category – I in India.

The regulations governing the opening of EEFC accounts are outlined in Regulation 4 (D) of the Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India) Regulations, 2015.

A person resident in India can open and maintain a foreign currency account with a bank outside or within India, subject to the terms and conditions set out in the Memorandum PEM.A.5.

Individuals residing in India can include their close relatives, specified by the Companies Act 2013, as joint holders in their EEFC accounts for purposes of inheritance or survivorship.

The EEFC account is a non-interest bearing current account, meaning it doesn't earn interest. No loans are allowed against the balance in this account.

All foreign exchange earners can deposit their earnings into EEFC accounts without any limitations, but they have to convert the accumulated balance into Indian Rupees by the end of the following month. This rule aims to prevent holding large foreign assets within the country.

Money received through regular bank channels for trade or business transactions is eligible to be deposited into an EEFC account. However, funds from foreign loans, investments, or specific obligations cannot be deposited into this account.

100% Export Oriented Units (EOUs) and units in Export Processing Zones (EPZs), Software Technology Parks (STPs), and Electronic Hardware Technology Parks (EHTPs) can deposit foreign exchange earnings in their EEFC accounts for various transactions, including payments to other EOUs/EPZs/STPs/EHTPs and units in Domestic Tariff Area (DTA).

The purpose of the EEFC scheme is to help exporters save on transaction costs related to foreign currency exchange. It's not designed to enable hoarding of foreign assets, as India's capital account is not fully convertible.

The EEFC account serves as a tool for managing foreign exchange transactions for exporters, allowing them to temporarily hold foreign earnings for permitted purposes.

The EEFC scheme helps in streamlining the management of foreign exchange transactions within the country by enabling exporters to hold their foreign earnings for a short period before converting them to Indian Rupees. This contributes to a more efficient and cost-effective foreign exchange management system.