The Reserve Bank of India (RBI) continues to enhance India’s integration with global markets by facilitating smoother cross-border trade and foreign exchange operations. On October 13, 2025, RBI announced key amendments to the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 and the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015. These changes are part of a broader agenda outlined in the Statement on Developmental and Regulatory Policies issued on October 1, 2025.
These new regulatory steps aim to simplify foreign currency operations and expand trade linkages, particularly with neighbouring countries like Nepal, Bhutan, and Sri Lanka, while offering greater operational flexibility to Indian exporters.
Key Amendments Announced
1. INR Lending Permitted to Neighbouring Countries
One of the most significant changes is that Authorised Dealer (AD) banks in India and their overseas branches are now permitted to lend in Indian Rupees (INR) to residents of Bhutan, Nepal, and Sri Lanka, including local banks in these jurisdictions.
This move is expected to:
- Facilitate smoother trade transactions with these neighbouring nations.
- Reduce dependency on third-party currencies (like the US Dollar) for regional trade.
- Strengthen the regional role of the Indian Rupee in South Asia.
By encouraging direct INR-denominated transactions, the RBI aims to promote rupee internationalization and strengthen India’s financial and trade relationships in the neighbourhood.
2. Relaxation in Repatriation Timeline for Exporters
Earlier this year, RBI allowed Indian exporters to open foreign currency accounts with banks outside India to manage export proceeds. However, unutilised balances in these accounts were required to be repatriated by the end of the month following realisation.
Under the latest amendment, this repatriation timeline has been extended to three months — only if the foreign currency account is maintained with a bank in an Indian IFSC (International Financial Services Centre).
This extension provides:
- Greater liquidity flexibility to exporters.
- An incentive to route export proceeds through Indian IFSCs, especially in GIFT City.
- Strengthening of the onshore financial ecosystem and promoting India as a hub for international finance.
Supporting Regulatory Framework Updated
To reflect these changes, RBI has also amended its Master Directions:
- Export of Goods and Services
- Deposits and Accounts
These updates ensure regulatory clarity and guide banks and exporters on operationalising the new provisions.
Why This Matters
These amendments are part of RBI’s long-term strategy to:
- Promote efficient capital movement.
- Improve ease of doing business in foreign trade.
- Position India as a regional financial powerhouse.
- Support the government’s “Act East” and “Neighbourhood First” policy through stronger economic integration.
Conclusion
The Reserve Bank of India’s recent steps mark a significant progression in India’s external trade facilitation. By easing forex rules, promoting the use of INR in regional trade, and giving exporters more breathing room, the RBI is creating an environment that aligns with India’s ambitious trade and financial sector goals. These measures, while technical in nature, have deep implications for businesses, banks, and the broader economy as India positions itself as a global economic leader.