DGFT notified under FTP to permit Invoicing, payment and settlement of exports/imports in INR in sync with RBI’s circular
The DGFT vide Notification No. 33/2015-2020 dated September 16, 2022 notified Para 2.54(d) under the Foreign Trade Policy, 2015-2022 (“FTP”) to permit Invoicing, payment and settlement of exports and imports in Indian Rupee (“INR”) in sync with Reserve Bank of India (“RBI’s”) recent A.P. (DIR Series) Circular No.10 dated July 11, 2022.
Para 2.52(d) is introduced as under:
(d) Invoicing, payment and settlement of exports and imports is also permissible in INR under RBI’s A.P.(DIR Series) Circular No.10 dated July 11, 2022. Accordingly, settlement of trade transactions in INR may also take place through the Special Rupee Vostro Accounts opened by AD banks in India as permitted under Regulation 7 (1) of Foreign Exchange Management (Deposit) Regulations, 2016, in accordance to the following procedures:
(i) Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the Special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier.
(ii) Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country.
Effect of this Notification: This will enable Indian importers and exporters to maintain accounts in INR thereby effects of foreign currency conversion will be eliminated. Denominating invoices in INR is optional and not mandatory. The importer/exporter needs to approach respective Authorized Dealer bank to avail this service. Primafacie it seems that this will also mitigate the impact of foreign exchange currency gain/loss. This shall come into force with immediate effect. This is an historical change in Foreign Trade Policy.
Limitation: The purpose of this article is for knowledge sharing purpose. Views expressed in this note are personal views of the author. The same should not be construed as professional advise