India amends Foreign Trade Policy for easier rupee invoicing and payments for exporters
The Directorate General of Foreign Trade (DGFT) amended the Foreign Trade Policy (FTP) 2023 to widen the scope for invoicing, payment, and settlement of exports in Indian Rupees, with the amendment issued via a trade notification and taking effect immediately.
For exports to countries outside the Asian Clearing Union (ACU), contracts and invoices can now be denominated in either Indian Rupees or any foreign currency, at the exporter's choice.
Rupee receipts realised through approved banking channels for such exports will now qualify for Foreign Trade Policy benefits and count towards fulfilment of export obligations, on par with foreign-currency receipts.
Separate, distinct rules continue to apply for exports to ACU member countries and to Nepal and Bhutan, which follow currency arrangements determined by the ACU or by the Reserve Bank of India (RBI).
The move aligns DGFT trade-policy rules with the RBI's existing foreign exchange regulations and is intended to reduce currency-conversion costs and risks for Indian exporters while supporting wider international use of the rupee.
Foreign Trade Policy (FTP) 2023 and the DGFT's Amendment Powers
The Foreign Trade Policy 2023 is India's current trade-policy framework, notified by the DGFT under the Ministry of Commerce and Industry and effective from 1 April 2023, replacing FTP 2015-20. Unlike earlier five-year policies, FTP 2023 has no fixed "sunset" date and is designed to be updated continuously through periodic notifications, which is the mechanism used for this amendment on rupee invoicing.
Key Details
- Statutory basis: Foreign Trade (Development and Regulation) Act, 1992; implementing authority: DGFT, Ministry of Commerce and Industry
- FTP 2023 replaced FTP 2015-20 and dropped the fixed five-year policy cycle in favour of continuous, dynamic updates
- Stated export target under FTP 2023: US $2 trillion in goods and services exports by 2030
- FTP 2023's four pillars: incentive-to-remission shift, export promotion through collaboration (exporters-states-districts-Indian missions), ease of doing business, and emerging areas (e-commerce exports, districts as export hubs)
This rupee-invoicing amendment is a live example of FTP 2023's "continuous updation" design — DGFT altering trade-policy rules through a notification rather than waiting for a new five-year policy cycle.
RBI's Rupee Trade Settlement Mechanism and Vostro Accounts
The Reserve Bank of India instituted an additional mechanism on 11 July 2022, under the Foreign Exchange Management Act (FEMA), 1999, for invoicing, payment, and settlement of exports and imports in Indian Rupees, supplementing the existing system of settlement in convertible foreign currencies. Under this framework, Authorised Dealer banks in India can open Special Rupee Vostro Accounts for correspondent banks of partner countries; Indian importers pay into these accounts in INR, and exporters are paid out of them.
Key Details
- RBI circular: 11 July 2022, issued under FEMA, 1999; requires RBI Foreign Exchange Department approval before a bank operationalises the mechanism
- 20+ countries have opened Special Rupee Vostro Accounts with Indian banks, including Russia, Sri Lanka, Bangladesh, the UK, Germany, and Mauritius
- The DGFT amendment builds directly on this RBI mechanism by clarifying that rupee receipts realised through it count as eligible export proceeds for trade-policy compliance and incentive purposes
The amendment closes a compliance gap: while the RBI's 2022 mechanism allowed rupee settlement, ambiguity remained over whether DGFT would treat such receipts as valid for export obligation/benefit purposes — this notification resolves that ambiguity.
Asian Clearing Union (ACU) — Distinct Currency Rules for Member Countries
The Asian Clearing Union is a regional clearing arrangement, headquartered in Tehran, that facilitates multilateral settlement of payments for intra-regional trade among member central banks, reducing the need for individual bilateral currency transfers. India, through the RBI, is the ACU's dominant member by transaction share, and trade with fellow ACU members follows currency and settlement rules determined by the ACU itself rather than the general FTP rupee-invoicing provision.
Key Details
- ACU members: Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka (central banks)
- India accounts for the large majority of ACU's settlement volumes, giving it significant influence within the union
- Under the new amendment, exports to non-ACU countries get free choice of INR or foreign-currency invoicing; exports to ACU members (other than Nepal and Bhutan, which have their own specific rupee-trade rules) must follow ACU-determined currency arrangements, though invoicing/settlement can also follow RBI directions
- ACU was established to promote intra-regional trade and monetary cooperation among South Asian and neighbouring central banks
The amendment explicitly carves out ACU members as a separate category, illustrating how India's push for rupee internationalisation must work around pre-existing multilateral currency-clearing commitments.
- FTP 2023 in effect from: 1 April 2023; no fixed sunset clause; statutory basis: FT(D&R) Act, 1992
- RBI rupee trade settlement (Vostro) mechanism notified: 11 July 2022, under FEMA, 1999
- India's stated export target under FTP 2023: US $2 trillion by 2030
- ACU members: Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan, Sri Lanka
- Under the amendment: non-ACU country exports may be invoiced in INR or any foreign currency; ACU-member exports (except Nepal, Bhutan) follow ACU-determined currency rules
- Eligible rupee export receipts now count towards Foreign Trade Policy benefits and export obligation fulfilment, on par with foreign-currency receipts