RBI’S FOREIGN EXCHANGE MANAGEMENT (EXPORT & IMPORT OF GOODS AND SERVICES) REGULATIONS, 2026----A MAJOR FEMA COMPLIANCE OVERHAUL

 RBI’S FOREIGN EXCHANGE MANAGEMENT (EXPORT & IMPORT OF GOODS AND SERVICES) REGULATIONS, 2026----A MAJOR FEMA COMPLIANCE OVERHAUL

FEMA (EXPORT & IMPORT OF GOODS AND SERVICES) REGULATIONS, 2026

The RBI has introduced the FEMA (Export & Import of Goods and Services) Regulations, 2026, effective October 1, 2026, overhauling old rules for simplified, unified, and digitalized trade compliance, bringing services under a single framework, easing burdens for smaller traders, and shifting more responsibility to AD banks for monitoring via systems like EDPMS and IDPMS.

WHAT IS NEW ?

KEY CHANGES INCLUDE

·    streamlined reporting timelines (e.g., within 5 days for export forms),

·    tighter monitoring, and

·    new reporting for guarantees (FEMA Guarantees Regulations 2026), aiming for greater transparency and ease of doing business.

EFFECTIVE DATE:

1 October 2026 (giving businesses time to realign systems & processes)

KEY CHANGES & BENEFITS

UNIFIED FRAMEWORK:

Combines goods and services trade under one set of rules.

DIGITAL FOCUS:

Mandates reporting via EDPMS/IDPMS for all remittances, with stricter timelines for AD banks.

EASE OF DOING BUSINESS:

Simplifies processes for smaller exporters and merchants, including self-declaration for import closures up to INR 1 million.

ENHANCED REPORTING:

Standardizes reporting for guarantees (Form GRN) and discontinues separate quarterly reporting for trade credit guarantees.

BANK RESPONSIBILITY:

Places more onus on Authorized Dealer banks for transaction oversight, using their internal assessment and digital platforms.

TRADE FAIR FLEXIBILITY:

Allows easier export of goods for exhibitions abroad, with provisions for selling, gifting, and simplified re-import reporting.

·    Simplification and compliance ease, especially for MSMEs and small traders.

·    Stronger oversight to mitigate risks such as delayed realization and misuse of advance payments.

MAJOR COMPLIANCE AND REPORTING CHANGES

A. REPORTING TIMELINES & DIGITAL PROCESSES

·    Authorised Dealer (AD) banks must enter export and import declarations into EDPMS/IDPMS within strict timelines (e.g., within five business days of receipt of required export documentation).

·    All inward and outward remittances tied to trade must be reported digitally, tightening the compliance regime relative to pre-existing circular-based processes.

COMPLIANCE IMPACT:

Trade finance teams must update SOPs and workflows to ensure punctual digital reporting and reconciliation, reducing manual exceptions.

EXTENDED REALISATION & REPATRIATION PERIODS

Although initially introduced in late 2025 under a second amendment, the 2026 Regulations formalize and align these extended timelines:

REALISATION OF EXPORT PROCEEDS: Extended to up to 15 months from the date of export (up from 9 months).

ADVANCE PAYMENTS:

Extended timelines to adjust/settle advance payments (previously a maximum of one year) — subject to AD bank assessment.

COMPLIANCE IMPACT:

Finance teams must revise cash-flow forecasts and FEMA tracking calendars to reflect extended realization windows.

SERVICE EXPORTS NOW FULLY WITHIN FEMA

A pivotal regulatory shift is that export of services — including software and IT services — is explicitly brought within the FEMA reporting regime, with defined timelines for filing Export Declaration Forms (EDF).

COMPLIANCE IMPACT:

Service exporters must adopt formal export tracking, aligning their documentation processes with those of goods exporters (EDF filing, bank reporting).

BANK DISCRETION AND OVERSIGHT

·    The Regulations give authorized dealer banks greater discretion to:

·    Grant extensions for delayed realization based on bona fide reasons.

·    Set-off receivables against payables within stipulated periods.

·    Monitor import payments and advance remittances with heightened scrutiny.

However, in cases of prolonged non-realisation of proceeds, exports may only continue against full advance payment or irrevocable letters of credit.

RELIEF FOR SMALL-VALUE TRANSACTIONS

For transactions up to ₹10 lakh per bill/invoice:

·    Self-declarations by exporters/importers are permitted for closing entries in EDPMS/IDPMS, easing small-value compliance burdens.

ADVANCE REMITTANCES & PROHIBITIONS

Advance remittances for imports continue to be allowed, but advance payments for bullion imports are now prohibited under the refreshed regime.

OTHER KEY HIGHLIGHTS

🔹 Under-realization norms rationalized with commercial practicality + self-declaration for smaller cases

🔹 Set-off & third-party receipts/payments allowed, subject to AD Bank satisfaction

🔹 Advance & default rules clarified (same AD routing + interest cap linked to trade credit norms)

🔹 Merchanting Trade tightened: entire cycle must be completed within 6 months

🔹 Higher accountability for AD Banks (SOPs, fair charges, transparency & customer protection)

TAKEAWAY FOR BUSINESSES

This is a shift from procedural FEMA compliance to outcome-based regulation.

Exporters/importers—especially service exporters, startups, MNCs & Merchanting trade players—should start preparing early for system/process alignment.

R V SECKAR FCS,LLB 79047 19295