The Directorate General of Foreign Trade (DGFT) has relaxed rules for rupee based export transactions, allowing Indian exporters to invoice and receive payments in Indian Rupees (INR) with far greater flexibility. Under the amended framework, rupee receipts from almost any overseas market except Nepal and Bhutan will now qualify for benefits under the Foreign Trade Policy (FTP) and count toward export obligations. The move also permits exports financed through EXIM Bank or Government of India lines of credit to be invoiced in rupees, aligning trade policy with the Reserve Bank of India’s foreign exchange regulations.
What Has Changed Under the New DGFT Notification?
The DGFT, through Notification No. 30/2026-27 issued on 20 August 2026, amended the Foreign Trade Policy (FTP) 2023 with immediate effect. The amendment specifically revises Paragraph 2.52 on denomination of export contracts and Paragraph 2.53 on eligibility for FTP benefits. The objective is to harmonise trade policy with the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023 notified by the Reserve Bank of India (RBI).
Under the revised framework, three key changes stand out. First, for exports to countries outside the Asian Clearing Union (ACU), export contracts, invoices and payments can now be denominated and settled either in Indian rupees or in any freely convertible foreign currency, with payments receivable in either currency through approved banking channels. Second, rupee payments received through authorised banking channels, including through Special Rupee Vostro Accounts (SRVAs), for exports to any country other than Nepal and Bhutan will be treated at par with foreign currency earnings. They will qualify for FTP benefits and will count towards fulfilment of export obligations. Third, exports financed under Export-Import Bank of India (EXIM Bank) lines of credit or Government of India (GoI) lines of credit may now be invoiced in INR. Earlier, such strategic, government backed exports were typically invoiced in foreign currency.
The notification makes it clear that the previous regulatory uncertainty is over. Earlier, even when the RBI permitted rupee settlement, exporters were unsure whether a rupee realisation would be considered valid for claiming incentives like duty remission or for meeting obligations under schemes such as the Export Promotion Capital Goods (EPCG) and Advance Authorisation. The amended paragraphs now explicitly grant 100 percent parity to eligible rupee realisations.
For ACU member countries, which include Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka, separate settlement rules continue. Contracts with Bangladesh, Iran, Maldives, Myanmar, Pakistan and Sri Lanka must follow the currency arrangement determined by the ACU, though invoicing and settlement may also follow directions issued by the RBI. Trade with Iran involving specified sensitive goods and technologies remains subject to compliance with Para 2.19 of the FTP, which covers India’s non proliferation commitments. For Nepal and Bhutan, export contracts generally continue to be denominated and settled in Indian rupees as per existing bilateral arrangements and RBI directions.
Understanding the Foreign Trade Policy and Export Obligations
To see why the change matters, it is important to understand what the Foreign Trade Policy is and what export obligations mean.
The Foreign Trade Policy (FTP) is the set of guidelines notified by the Central Government under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992. It lays down the rules, incentives and procedures for imports and exports of goods and services. The current policy, FTP 2023, was notified on 1 April 2023 and unlike earlier five year policies, it is designed as a dynamic, open ended policy without a fixed end date.
The FTP offers several promotion schemes to make Indian exports more competitive. Any exporter who wants to claim benefits must hold a 10 digit Importer Exporter Code (IEC) issued by the DGFT. The key schemes linked to the present change are:
| Scheme | What It Offers | Export Obligation Involved |
|---|---|---|
| Remission of Duties and Taxes on Exported Products (RoDTEP) | Refunds embedded central, state and local duties and taxes that are not otherwise refunded, through transferable electronic scrips | No direct obligation, but only eligible exports can generate scrips |
| Rebate of State and Central Taxes and Levies (RoSCTL) | Rebates embedded taxes and levies for apparel and textile exports | Similar to RoDTEP, benefit linked to eligible exports |
| Duty Drawback | Refunds customs duties paid on imported inputs used in exported goods, at all industry or brand rates | Linked to proof of export and realisation |
| Advance Authorisation Scheme | Allows duty free import of inputs required to make export products, with the quantity based on Standard Input Output Norms (SION) | Must fulfil export obligation, typically with 15 percent value addition, within 18 months |
| Export Promotion Capital Goods (EPCG) Scheme | Allows import of capital goods and machinery at zero customs duty for production of export goods | Must fulfil export obligation equal to 6 times the duty saved within 6 years, plus maintenance of average export obligation |
An export obligation is a legal commitment taken by an exporter when availing duty free imports under Advance Authorisation or EPCG. If the exporter fails to achieve the required exports within the prescribed period, the duty saved must be paid back along with interest, which is currently 15 percent per annum, and the bank guarantee remains enforceable. The Export Obligation Discharge Certificate (EODC), issued by the regional authority of the DGFT after verifying fulfilment, is needed to close the authorisation.
Earlier, even if an exporter received payment in rupees through an RBI approved channel, it was not always clear whether that receipt would be accepted as valid export realisation for claiming RoDTEP or for showing that the export obligation had been met. The new rule removes this doubt by treating eligible rupee realisations exactly like foreign currency realisations.
Key Institutions Behind the Reform
Directorate General of Foreign Trade
The Directorate General of Foreign Trade (DGFT) is an attached office of the Ministry of Commerce and Industry, Government of India, with headquarters at Vanijya Bhawan, New Delhi. It was earlier known as the Chief Controller of Imports and Exports (CCI&E). Until 1991, when India launched liberalisation, DGFT functioned mainly as a controller of trade. After the 1991 reforms, its role shifted to that of a facilitator of foreign trade.
Headed by the Director General of Foreign Trade, who is an ex officio Additional Secretary to the Government of India, the DGFT is responsible for formulating and implementing the FTP, issuing the Handbook of Procedures, maintaining the ITC (HS) Classification of import and export items, granting the Importer Exporter Code (IEC), regulating Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) items, and administering export promotion schemes. It operates through more than 24 Regional Authorities across India, including zonal offices in Mumbai, Delhi, Chennai and Kolkata.
Export Import Bank of India and Government Lines of Credit
The Export Import Bank of India (EXIM Bank) was established under the Export Import Bank of India Act, 1981 and is wholly owned by the Government of India. It functions as an All India Financial Institution (AIFI) regulated by the RBI, alongside institutions like NABARD and SIDBI. Headquartered in Mumbai, EXIM Bank finances, facilitates and promotes India’s international trade.
One of its core tools is the Line of Credit (LOC). A line of credit is a credit facility extended by EXIM Bank to overseas governments, financial institutions, regional development banks and other entities to enable buyers in those countries to import developmental projects, equipment, goods and services from India on deferred payment terms. This helps Indian exporters enter new markets without facing payment risk.
Under the Indian Development and Economic Assistance Scheme (IDEAS), formulated in 2003-04 as the Indian Development Initiative, the Government of India extends concessional lines of credit through EXIM Bank to share India’s development experience with partner countries. EXIM Bank raises the resources and funds the disbursement, while the Government of India provides guarantee and interest equalisation support. By early 2020, EXIM Bank had in place 258 lines of credit covering 64 countries in Africa, Asia, Latin America and the CIS, with credit commitments of around $25.48 billion. The present DGFT amendment allowing INR invoicing for such LOC backed exports therefore directly affects government supported project exports to developing countries.
The RBI Link: FEMA and Special Rupee Vostro Accounts
The reform completes a regulatory chain that began with the RBI. On 11 July 2022, the RBI introduced an additional arrangement for invoicing, payment and settlement of international trade in rupees through Special Rupee Vostro Accounts (SRVAs), vide A.P. (DIR Series) Circular No. 10. A Vostro account is an account a foreign bank holds with an Indian bank in rupees. The special variant is specifically designed for cross border trade settlement in INR.
Under this mechanism, Indian importers pay in INR into the SRVA of the correspondent bank of the partner country, while Indian exporters are paid export proceeds in INR from balances in that designated SRVA. The exchange rate between INR and other currencies is market determined. Surplus balances in SRVAs can be invested in permissible instruments such as Central Government securities and Treasury Bills, making the rupee balances productive rather than idle.
To make the channel easier, the RBI removed the need for prior approval to open SRVAs. Since August 2025, Authorised Dealer Category I banks can open SRVAs for correspondent foreign banks on their own, without referring to the RBI. In July 2026, the RBI consolidated five separate circulars into a single master circular, A.P. (DIR Series) Circular No. 19 dated 17 July 2026, to give exporters and banks one clear rulebook. By mid 2026, 26 Indian banks had opened 156 SRVAs through 123 correspondent banks from 30 partner countries, including Russia, Sri Lanka, Malaysia, Bangladesh, Mauritius, Guyana, Seychelles and Fiji. However, rupee settlement remains optional and additional to the existing foreign currency system.
Asian Clearing Union and the Nepal Bhutan Exception
The Asian Clearing Union (ACU), established on 9 December 1974 at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) and headquartered in Tehran, Iran, is a multilateral payment arrangement. It facilitates clearing of eligible trade payments among member central banks on a multilateral netting basis, saving foreign exchange reserves and promoting regional monetary cooperation.
Its nine members are the central banks of Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka. Transactions within the ACU are settled using Asian Monetary Units (AMU), denominated as ACU dollar, ACU euro and ACU yen, each equivalent to one US dollar, one euro and one Japanese yen respectively.
Under the current FTP rules, payments between India and Nepal and between India and Bhutan are generally not routed through the ACU mechanism. Instead, trade with Nepal and Bhutan continues to be denominated and settled in Indian rupees, in line with long standing bilateral agreements. That is why the DGFT has kept these two neighbours outside the scope of the new rupee benefit parity, as their rupee trade already follows a dedicated framework. For other ACU members, the ACU determined settlement system continues to apply, though the RBI may issue specific directions permitting alternative arrangements.
Why the Relaxation Matters
The amendment is more than a procedural fix. It carries wider economic and strategic significance.
First, it reduces currency conversion costs and exchange rate risk for Indian exporters. Direct invoicing in rupees eliminates the double conversion from local currency to US dollar and then to rupees. For Micro, Small and Medium Enterprises (MSMEs), which account for 55 to 60 percent of exporters availing Advance Authorisation and EPCG, this improves price competitiveness and margin predictability, especially in long term contracts.
Second, it helps trade with dollar scarce partners. Many developing countries in Africa, Central Asia and Latin America face serious shortages of US dollars and limited access to international payment networks. Allowing them to pay in rupees, with the Indian exporter still getting full export incentives, makes Indian goods more accessible. This was particularly relevant for continued trade with countries such as Russia, where sanctions made dollar settlement difficult after 2022.
Third, it advances the internationalisation of the rupee without challenging the dollar outright. The government has consistently stated that rupee internationalisation is aimed at facilitating bilateral trade rather than replacing the dollar or creating an alternative BRICS currency. By giving legal certainty and incentive parity to rupee earnings, the DGFT creates a demand side pull for the SRVA mechanism, deepens the domestic government securities market where SRVA balances can be invested, and insulates supply chains from geopolitical disruptions such as sanctions or payment network blocks. At present, rupee settled trade is estimated to be a modest share of India’s total external trade, well below one percent of global trade settlement, but the policy creates the structural base for gradual growth.
Finally, the change supports EXIM and government backed project exports. Infrastructure, power, water supply and other development projects financed through concessional lines of credit can now be invoiced in rupees. This aligns procurement and financing in the same currency and reduces hedging costs for both India and the recipient government.
Hurdles That Still Limit Rupee Trade
Analysts, including the Global Trade Research Initiative (GTRI), have welcomed the regulatory clarity but cautioned that commercial hurdles remain.
Foreign buyers often struggle to source rupees in their local market, as the rupee is not fully convertible on the capital account. Overseas banks may hesitate to hold large rupee balances because of limited avenues to use them outside India. Trade imbalances can leave partner countries with unused rupee surpluses that are difficult to deploy, even though RBI now permits investment in government securities.
Exchange rate risks do not disappear, they only shift. Hedging rupee exposure can be expensive and complex, especially where no liquid forward market exists for the currency pair. Banking procedures for SRVAs, documentation requirements and compliance checks under the Foreign Exchange Management Act (FEMA) remain unfamiliar to many smaller foreign banks. And the deep global preference for the US dollar, which accounts for about 50 to 60 percent of global trade settlement, means many buyers and banks still prefer dollar invoicing.
Without supporting measures such as country specific settlement arrangements, simpler banking procedures, affordable hedging tools, rupee based export credit and Export Credit Guarantee Corporation (ECGC) cover for rupee contracts, the facility may remain useful but limited in scale rather than becoming a widely used alternative.
The Way Forward
The DGFT amendment lays the legal foundation, but wider adoption will depend on the surrounding ecosystem. Three steps will be critical.
First, banking and financial depth. Indian authorised dealer banks need to actively market SRVA lines, publish clear directories, and offer competitive rupee trade finance. The RBI’s move to allow investment of SRVA balances in government securities and to remove approval requirements is a start. Further steps could include rupee denominated export credit at competitive rates and dedicated ECGC protection for rupee invoiced contracts.
Second, bilateral arrangements. India is already pursuing bilateral currency settlement pacts, including with the UAE, Indonesia, Maldives and Bangladesh. Tailored agreements that address how surplus rupees will be used, whether for investment, strategic asset purchases or netting against imports from India, will increase confidence among partner central banks.
Third, awareness among exporters. Many MSME exporters are still unaware that rupee realisation now counts for RoDTEP, RoSCTL, duty drawback and export obligation fulfilment. Outreach through Niryat Bandhu, District Industries Centres and the DGFT regional authorities, along with simple guidance on contract clauses for rupee invoicing, will be needed to translate the rule change into actual orders.
If these supporting elements come together, rupee invoicing could gradually move from a niche sanction driven channel to a regular option for price sensitive markets where India competes strongly, such as pharmaceuticals, engineering goods, textiles and agricultural commodities.
Key Takeaways
- The DGFT through Notification No. 30/2026-27 on 20 August 2026 amended FTP 2023 to align rupee export rules with the RBI’s Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023.
- For countries outside the ACU, export contracts and invoices can be denominated in INR or any freely convertible currency, with payments receivable in either currency through approved banking channels.
- Rupee payments received via approved channels, including Special Rupee Vostro Accounts (SRVAs), for exports to any country except Nepal and Bhutan will now qualify for FTP benefits and count towards export obligation fulfilment at par with foreign currency.
- Exports financed under EXIM Bank or Government of India lines of credit may now be invoiced in INR.
- The DGFT functions as an attached office of the Ministry of Commerce and Industry, headquartered in New Delhi, and was earlier known as the Chief Controller of Imports and Exports before its facilitator role after 1991.
- The EXIM Bank, established under the Export Import Bank of India Act, 1981 and headquartered in Mumbai, administers GoI supported lines of credit under IDEAS (2003-04), covering dozens of partner countries.
- The Asian Clearing Union (ACU), set up on 9 December 1974 by UNESCAP and headquartered in Tehran, has nine members and continues to govern rupee settlement for its members, with Nepal and Bhutan under separate bilateral rupee arrangements.
