The Directorate General of Foreign Trade (DGFT) eased rules enabling export payments in rupees for contracts, invoices and settlements with non-Asian Clearing Union (ACU) countries, in a move aimed at making rupee exports eligible for benefits under the government's trade policy while promoting broader use of the local currency in global trade.

Key Highlights

• DGFT allows export contracts and invoices with non-ACU countries to be denominated and settled in rupees.
• Rupee payments through approved banking channels will now qualify for Foreign Trade Policy benefits and export obligations.

The changes, 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.

Exporters Can Now Invoice in Rupees or Foreign Currency

Under the revised rules, exporters selling to countries outside the Asian Clearing Union can denominate export contracts and invoices in Indian rupees or any foreign currency, and receive payments accordingly.

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 previous 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 now be invoiced in Indian rupees.

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Different Rules Apply for ACU Member Countries

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 RBI.

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 remain subject to restrictions applicable to sensitive goods and technologies under the FTP.

A Step Toward Rupee Internationalization

The policy change could make rupee settlement more attractive for Indian exporters by reducing the need for currency conversion, 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 further support India's broader efforts to internationalize the rupee, allowing a wider range of cross-border transactions to be settled without relying exclusively on the US dollar.