DGFT Eases Rupee Export Rules for Global Trade

The Directorate General of Foreign Trade (DGFT) has revised the Foreign Trade Policy (FTP) 2023, making it simpler for Indian exporters to invoice international sales and receive payments in Indian rupees. This amendment specifically targets countries outside the Asian Clearing Union (ACU), where export contracts and invoices can now be denominated in either foreign currency or Indian rupees.

This strategic update aligns the FTP provisions for rupee-denominated export contracts and eligibility for FTP benefits with the Reserve Bank of India’s (RBI) Foreign Exchange Management (Manner of Receipt and Payment) Regulations 2023. The move aims to streamline trade processes and enhance the use of the Indian currency in global transactions.

New Rules for Rupee Settlement

Under the revised guidelines, eligible rupee payments received through approved banking channels will now qualify for FTP benefits. These payments will also count towards fulfilling export obligations, effectively placing them on par with foreign-currency receipts.

Furthermore, exports financed through lines of credit from the EXIM Bank or the Government of India may also be invoiced in rupees. This provides greater flexibility for exporters engaging with specific international partners.

Understanding the Asian Clearing Union

The Asian Clearing Union (ACU), established in 1974, serves as a regional payment arrangement designed to facilitate trade settlements among its member nations. Its primary goal is to minimize repetitive transfers of foreign exchange by allowing periodic net settlement of obligations.

The ACU comprises nine members, each represented by their central banks or monetary authorities:

• Bangladesh
• Bhutan
• India
• Iran
• Maldives
• Myanmar
• Nepal
• Pakistan
• Sri Lanka

For exports to Bangladesh, Iran, Maldives, Myanmar, Pakistan, and Sri Lanka, contracts must utilize a currency determined by the ACU. However, invoicing and settlement can also adhere to directions issued by the Reserve Bank of India.

Separately, export contracts with Nepal and Bhutan are generally required to be denominated and settled in Indian rupees or in accordance with specific RBI directives.

Benefits for Indian Exporters

The amendment resolves previous uncertainties for exporters who received rupee payments through RBI-approved banking channels regarding their eligibility for FTP benefits or their contribution to export obligations. This clarity ensures that eligible rupee receipts are now unequivocally treated the same as foreign-currency earnings.

According to Ajay Srivastava, Founder of the economic think tank GTRI, rupee settlement holds significant advantages. It is expected to reduce currency-conversion costs and mitigate exchange-rate risks for Indian exporters, fostering a more stable and predictable trade environment.