On 21-12-2023, the Reserve Bank of India (‘RBI’) notified the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023 mandating permission of RBI to make or receive payments from a person residing outside India. The provisions came into force on 21-12-2023.
Key Points:
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These Regulations will be governed by the Foreign Exchange Management Act, 1999 (‘FEMA’).
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Any person residing in India cannot make or receive payments from any person residing outside India:
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Unless permitted by RBI;
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Allowed by FEMA;
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Allowed by Rules or Directions under the FEMA;
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Manner of Receipt and Payment- The receipt or payment will be made through an Authorized Bank or Authorized Person in the following manner:
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Trade Transactions:
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Nepal & Bhutan- in Indian Rupees provided that in case of exports from India where the importer in Nepal has been permitted by the Nepal Rashtra Bank to make payment in foreign currency, such receipts towards the amount of the export may be in foreign currency.
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Member countries of Asian Clearing Union (‘ACU’), other than Nepal & Bhutan- through ACU mechanism or in case of imports where the goods are shipped to India from a member country of the ACU (other than Nepal and Bhutan) but the supplier is resident of a country other than a member country of the ACU then in Indian Rupees or in any foreign currency.
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Countries other than member countries of ACU- in Indian Rupees or in any foreign currency.
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Transactions other than Trade Transactions:
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Nepal & Bhutan- In Indian Rupees or in case of overseas investment in Bhutan, in foreign currency.
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Other Countries- in Indian Rupees or in any foreign currency.
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Payment and Receipt in India for any Current Account Transaction (other than a trade transaction) will be done only in Indian Rupees or by debit/ credit to a bank account maintained in terms of the rules, regulations or directions under FEMA.
Note: The Asian Clearing Union (ACU) is a payment arrangement between the central banks of Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka.