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The Directorate General of Foreign Trade (DGFT) has amended provisions of the Foreign Trade Policy (FTP) 2023 governing the denomination of export contracts and the eligibility of export transactions realised in Indian rupees for benefits under the policy. The changes to paragraphs 2.52 and 2.53 take immediate effect and are aimed at aligning the foreign trade framework with the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023.
Under the revised provisions, export contracts and invoices involving countries other than members of the Asian Clearing Union (ACU) can be denominated either in foreign currency or Indian rupees, with export proceeds permitted to be realised in either foreign currency or Indian rupees. This replaces the earlier framework under which export contracts and invoices were required to be denominated in freely convertible currency or Indian rupees, while export proceeds were generally required to be realised in freely convertible currency, subject to specified exceptions.
For exports involving ACU member countries other than Nepal and Bhutan, contracts will be denominated in a currency determined by the ACU. However, such transactions can also be denominated and settled in accordance with directions issued by the Reserve Bank of India (RBI) from time to time. The revised framework also removes the earlier detailed provisions relating to settlement through ACU dollars and ACU euros from paragraph 2.52 and places the treatment of such transactions within the applicable ACU and RBI framework.
The revised provisions specifically state that export contracts involving Nepal and Bhutan will be denominated and settled in Indian rupees, or in accordance with RBI directions issued from time to time. Export contracts and invoices under EXIM Bank or Government of India Lines of Credit can also be denominated in Indian rupees.
The DGFT has also revised paragraph 2.53 to clarify the eligibility of exports realised in Indian rupees for export benefits, incentives and fulfilment of export obligations under the FTP. Export proceeds realised in Indian rupees against exports to any country other than Nepal and Bhutan, where such proceeds are received through banking channels by credit to Indian rupee accounts of persons resident outside India opened in accordance with the Foreign Exchange Management (Deposit) Regulations, will be eligible for export benefits and incentives and for fulfilment of export obligations under the FTP, on par with exports realised in any foreign currency.
The revised provision retains a specific condition for exports to Iran. In such cases, the provisions relating to eligibility for FTP benefits will apply subject to compliance with paragraph 2.19 of the FTP.
The amendment provides greater clarity on the treatment of rupee-denominated export transactions within the export policy framework, particularly as Indian rupee settlement mechanisms are increasingly incorporated into cross-border trade arrangements. It also establishes a closer alignment between DGFT's export policy provisions and the foreign exchange regulatory framework administered by the RBI.
DGFT director general Lav Agarwal said the amendment has been made to align the provisions relating to the denomination of export contracts and eligibility for FTP benefits in respect of export realisations in Indian rupees with the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023.
The notification has been issued under the powers conferred by Sections 3 and 5 of the Foreign Trade (Development and Regulation) Act, 1992, read with paragraphs 1.02 and 2.01 of the FTP 2023, as amended from time to time. The amendment has been issued with the approval of the minister of commerce and industry and is effective immediately.
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