Dollar, euro or rupee? Government changes rules for export payments

The government has allowed exporters receiving payments in Indian rupees to access the same benefits under the Foreign Trade Policy (FTP) as those receiving eligible payments in freely convertible currencies such as the US dollar and euro.

The change, announced by the Directorate General of Foreign Trade (DGFT) on Thursday, could give exporters more flexibility in settling international trade transactions in rupees.

Rupee payments get equal treatment

Under the amended rules, eligible export payments received in rupees through approved banking channels can be considered for FTP benefits and towards export obligations, putting them on the same footing as eligible foreign-currency receipts.

The DGFT amended the FTP 2023 with immediate effect, bringing its provisions in line with the Reserve Bank of India’s Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023.

Rupee-denominated export transactions were first permitted in November 2022. The latest move expands the facility within the FTP framework introduced in April 2023.

For exporters, receiving payments in rupees could reduce the need for currency conversion and help limit exposure to exchange-rate fluctuations. It may also provide another settlement option when overseas buyers face difficulty accessing dollars or other established international payment channels.

Experts flag need for wider support

Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), said the notification “removes uncertainty” and “places eligible rupee export receipts on par” with foreign-currency earnings.

“Earlier, exporters receiving rupee payments through an RBI-approved banking channel were not always certain whether such receipts would qualify for FTP benefits or count toward their export obligations. The new rules remove this uncertainty by placing eligible rupee receipts on par with foreign-currency earnings,” he told Hindustan Times.

Srivastava said the change gives Indian exporters and overseas buyers greater scope to conduct trade in rupees instead of depending entirely on the dollar or another freely convertible currency.

However, he said wider adoption would require overseas buyers to have easier access to rupees and banks abroad to have practical ways to use, convert, invest or repatriate their rupee balances.

He also called for country-specific settlement arrangements, simpler banking procedures, affordable hedging, rupee-based export credit and export-credit insurance.

“Without this supporting system, rupee invoicing may remain a useful facility rather than becoming a widely used trade option,” he added.

Separate rules remain for some countries

The notification retains separate provisions for countries covered by the Asian Clearing Union, as well as Nepal and Bhutan.

For ACU members, trade contracts generally need to be denominated in an ACU-approved currency, subject to applicable RBI directions.