Reserve Bank of India (RBI) has issued the Regulations in suppression of the old Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 (Old regulations).
The Regulations aim to streamline the Old regulations towards the manner for receipt and payment in foreign exchange transactions.
The key changes undertaken in the Regulations are provided below:
- It clarifies that no person resident in India shall make or receive payments from a person resident outside India unless permitted under Foreign Exchange Management or approved by the RBI.
- In terms of the Old regulations, the payment needed to be received in ‘freely convertible foreign currency’. The scope has now been widened to include ‘foreign currency’ which means any currency other than Indian currency.
- The Regulations provides bifurcation basis the nature of transactions, into two categories i.e.:
- Trade transactions; and
- Non-trade transactions
- For trade transactions, receipt and payment conditions have been specified for various countries like Nepal, Bhutan, Asian Clearing Union (ACU) member countries.
- The manner of receipt and payment for Iran which was specifically provided in the Old regulations has been removed since Iran falls under the member country of ACU.
- In case of overseas investments in Bhutan, payment may also be made in foreign currency.
- The Regulations clarify that payment and receipt in India for any current account transaction, other than a trade transaction, between any person resident in India and a person resident outside India, who is on a visit to India, may be made only in Indian Rupees.
Source: Notification No. FEMA 14(R)/2023-RB dated 21 December 2023
