Insertion of Para 2.54(d) under the Foreign Trade Policy in sync with RBI A.P.(DIR Series) Circular No.10 dated 11th July 2022

## Report on Amendment to Foreign Trade Policy 2015-2020 Regarding INR Denomination of Export Contracts **1. Executive Summary:** This report analyzes an amendment to the Foreign Trade Policy (FTP) 2015-2020. The amendment, effective immediately, inserts sub-paragraph (d) under Para 2.52, focusing on the denomination of export contracts. The core purpose of this amendment is to permit invoicing, payment, and settlement of exports and imports in Indian Rupees (INR), aligning with Reserve Bank of India (RBI) guidelines. This report highlights the key changes, affected parties, and anticipated outcomes of this policy update. **2. Introduction:** This report aims to provide a comprehensive overview of the amendment to the Foreign Trade Policy 2015-2020, specifically regarding the denomination of export contracts in INR. The analysis is based solely on the provided government policy text. **3. Policy Overview:** * **Original Policy:** Foreign Trade Policy 2015-2020, as amended from time to time. * **Core Objective(s):** Based on the text, the objective of this specific amendment is to facilitate and formally permit the invoicing, payment, and settlement of exports and imports in INR. **4. Background and Rationale:** This amendment likely stems from a need to promote the use of the Indian Rupee in international trade transactions. The provided text indicates a close alignment with RBI A.P.DIR Series Circular No.10 dated 11th July 2022. This suggests the amendment is designed to formalize and operationalize RBI guidelines regarding INR invoicing, payment, and settlement within the framework of the existing Foreign Trade Policy. The amendment addresses the need for clarity and official sanction for INR transactions in international trade. **5. Key Provisions / Changes:** This amendment focuses specifically on changes introduced to Para 2.52 of the Foreign Trade Policy. * **Specific Part of the Original Policy Changed:** Para 2.52, "Denomination of Export Contracts". A new sub-paragraph (d) is *inserted*. * **New Rule/Provision:** The new sub-paragraph 2.52(d) explicitly states that "Invoicing, payment and settlement of exports and imports is also permissible in INR under RBIs A.P.DIR Series Circular No.10 dated 11th July, 2022." It further clarifies that settlement of trade transactions in INR can occur through Special Rupee Vostro Accounts opened by Authorized Dealer (AD) banks in India, as permitted under Regulation 71 of Foreign Exchange Management Deposit Regulations, 2016. The amendment also outlines the procedures for payments by Indian importers and to Indian exporters using the Special Vostro accounts. * **Difference/Effect of Change:** This amendment *formally* *allows* for INR-denominated transactions in foreign trade under the FTP. Previously, while potentially practiced, it lacked clear and explicit sanction within the FTP framework. It provides a mechanism for INR settlements via Special Vostro accounts, standardizing the process for importers and exporters. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders directly affected by this amendment include: * **Indian Importers:** Who can now make payments in INR for goods and services from overseas suppliers, credited to the Special Vostro account of the correspondent bank in the partner country. * **Indian Exporters:** Who will receive export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank in the partner country. * **Authorized Dealer (AD) Banks in India:** Who will be responsible for opening and managing the Special Rupee Vostro Accounts. * **Overseas Suppliers and Buyers:** Whose banks in partner countries will need to establish Vostro account relationships with Indian AD banks. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** * Directorate General of Foreign Trade (DGFT), Ministry of Commerce and Industry, is responsible for issuing the notification. * Reserve Bank of India (RBI) provides the regulatory framework through its A.P.DIR Series Circular No. 10. * Authorized Dealer (AD) banks in India are responsible for implementing the Vostro account mechanism. * **Timelines/Procedures:** The amendment is effective immediately (from September 16, 2022). The text specifies the procedures for INR payments by importers (crediting the Vostro account) and payments to exporters (receiving INR from the Vostro account). * **Implementation Aspects Related Specifically to the Changes:** The establishment and operationalization of Special Rupee Vostro Accounts are key to implementing this amendment. AD banks and their partner banks will need to establish these accounts and ensure smooth transaction processing. **8. Expected Outcomes / Impact of Changes:** The likely intended outcome of this amendment is to: * **Promote the use of INR in international trade:** Reducing reliance on major foreign currencies like the US dollar. * **Reduce exchange rate risk:** For Indian importers and exporters, by conducting transactions in INR. * **Facilitate trade with countries:** Where access to major foreign currencies may be limited. * **Streamline settlement processes:** Through the established Special Vostro account mechanism. * **Increased Trade:** This may encourage increased trade and business with countries who are open to trading in INR. **9. Conclusion:** This amendment to the Foreign Trade Policy 2015-2020, effective immediately, formally permits invoicing, payment, and settlement of exports and imports in INR. It provides a standardized mechanism for INR transactions via Special Rupee Vostro accounts, offering potential benefits such as reduced exchange rate risk and promotion of the Indian Rupee in international trade. The key to successful implementation lies in the efficient establishment and management of Special Vostro accounts by AD banks and their correspondent banks in partner countries.

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