The Directorate General of Foreign Trade (DGFT) eased rules allowing export contracts, invoices, and payments with non-Asian Clearing Union (ACU) countries to be denominated and settled in rupee or foreign currencies, in a move aimed at allowing rupee exports to be eligible for benefits under the government’s trade policy and also promote the use of the local currency in global trade.
The changes, which have been notified with immediate effect, amend the provisions of the Foreign Trade Policy (FTP) 2023 to align it with foreign-exchange regulations issued by the Reserve Bank of India (RBI) in 2023.
Under the revised rules, exporters selling to countries outside the Asian Clearing Union (ACU) can denominate export contracts and invoices in Indian rupees or any foreign currency and receive payments accordingly.
The rupee payments received through approved banking channels will now qualify for benefits under the Foreign Trade Policy and count towards fulfilment of export obligations. This removes uncertainty over whether rupee-denominated export receipts would receive the same treatment as foreign-currency earnings.
According to the new rules, exports financed through EXIM Bank or Government of India lines of credit can also be invoiced in Indian rupees.
The rules differ for countries that are members of the Asian Clearing Union. For exports to Bangladesh, Iran, Maldives, Myanmar, Pakistan, and Sri Lanka, contracts are required to use currencies determined by the ACU, while invoicing and settlement can also follow directions issued by the Reserve Bank of India.
Nepal and Bhutan are treated separately, with export contracts generally required to be denominated and settled in Indian rupees or in accordance with RBI directions.
Trade with Iran will continue to be subject to restrictions applicable to sensitive goods and technologies under the FTP.
The policy change could make rupee settlement more attractive for Indian exporters by reducing the need for currency conversion and potentially lowering associated costs and exchange-rate risks.
It could also provide an alternative payment mechanism for trade with countries facing US dollar shortages or difficulties accessing established international payment channels.
The new rules also back India’s wider efforts to internationalise the rupee by allowing more cross-border transactions to be settled without relying exclusively on the US dollar.
