Exporters press RBI to soften revised FEMA rules

Indian exporters are pressing the Reserve Bank of India to revise proposed FEMA changes, warning that the draft could tighten liquidity, complicate trade finance and create operational friction unless the central bank narrows one key restriction and clarifies several rules.

The concerns surfaced after RBI Governor Sanjay Malhotra met export promotion bodies on Thursday, June 26, 2026. Reporting that emerged on Saturday, June 27, said exporters had raised at least six issues in the discussion and that the central bank was examining several of the suggestions favorably.

What exporters want changed

The sharpest dispute centers on a proposed rule that would affect exporters whose export proceeds remain unrealised beyond one year from the due date of realisation, or any extended period allowed. Under the draft, future exports would have to be shipped only against full advance payment or an irrevocable letter of credit.

Industry groups say that requirement is too blunt. Their position is that any restriction should apply only to the defaulting buyer, not to all of an exporter’s customers.

They argue that many exporters work with a diversified buyer base and should not be penalised across their whole business because one counterparty failed to pay on time. In their view, a blanket restriction could disrupt trade even for firms that otherwise remain compliant with foreign-exchange rules.

Credit and liquidity pressure

Exporters are also worried about financing conditions. The Federation of Indian Export Organisations said priority sector export credit had fallen 14% by February 2026 even as goods and services exports were up nearly 4%.

That drop matters because export businesses often depend on pre-shipment and post-shipment finance to move goods, pay suppliers and bridge the gap between shipment and payment. Exporters want smoother access to that credit at competitive rates.

They also want better transmission of interest-equalisation benefits, arguing that weak credit flow can quickly turn into a working-capital problem for trade-heavy businesses.

Merchanting trade and compliance friction

Another concern is merchanting trade, especially where the underlying goods are restricted or prohibited and do not physically enter India. Exporters and trade bodies say the revised FEMA framework should spell out those rules more clearly so that routine transactions are not left in ambiguity.

They also want the central bank to address problems linked to the Export Data Processing and Monitoring System, or EDPMS. Exporters said some shipping bills remain unregularised because banks refuse to process documents for sanction-related or commercial-risk reasons.

That leaves companies with open compliance items even after the underlying trade has been completed. Industry representatives say the issue is operational as well as regulatory, and that the paperwork bottleneck can create avoidable friction.

RBI's response and the policy stakes

According to the reporting, RBI was receptive to several of the suggestions and is examining them. Exporters are now waiting to see which ideas are reflected in the final wording of the revised rules.

The broader stakes are significant. FEMA governs India’s foreign-exchange and trade-related rules, so even a technical revision can affect how exporters finance shipments, settle receipts and manage counterparties.

A narrower reading of the draft could amount to a modest tightening focused on specific defaults. A broader reading, exporters warn, could become a heavier operational burden for firms with multiple customers and thin margins.

For now, the industry’s main asks are consistent: keep any future-export restriction limited to the defaulting buyer, preserve access to export credit, clarify merchanting trade rules and reduce friction in EDPMS closures.

The next watchpoint is whether RBI formally revises the draft before implementation later in 2026 and whether it narrows the disputed restriction in response to industry feedback.