RBI’s 2026 FEMA changes: nine-month export deadline, 20% hedge reserve, no rebooking

Between 22 September and 12 October 2026, the Reserve Bank of India (RBI) changed three rules for businesses with foreign currency flows. The new export-import regulations under the Foreign Exchange Management Act, 1999 (FEMA), in force from 1 October 2026, give exporters nine months, not the fifteen first notified, to realise and repatriate export proceeds. Banks must now keep a 20 per cent Foreign Exchange Risk Reserve (FERR) with RBI on rupee hedges above USD 2 million where the customer buys foreign currency to hedge current account transactions. And a rupee hedge cancelled after the directions of 10 October 2026 can no longer be rebooked, while the limit for hedging without establishing the underlying exposure has fallen from USD 100 million to USD 5 million.

Exporters mainly feel the realisation deadline. Importers and others who buy foreign currency feel the reserve, which the bank keeps; the rules are silent on whether its cost is passed on. Anyone who hedges loses the option to cancel a hedge and book it again later, and more hedges will need evidence of the exposure behind them. We reported each change as it came out: the nine-month realisation period, the risk reserve and the rebooking ban.

The bottom line: plan collections around nine months from shipment or invoice, size and document hedges with the USD 2 million and USD 5 million thresholds in mind, and treat cancelling a rupee hedge as final.

What changed

1. Export proceeds: nine months from shipment or invoice

The Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 (Notification No. FEMA 23(R)/2026-RB dated 13 January 2026) replaced the 2015 export regulations from 1 October 2026. Regulation 5 sets the period within which the full export value, or a reduced value the bank allows, must be realised (including by set-off) and repatriated. An amending notification dated 22 September 2026 (No. FEMA 23(R)/(1)/2026-RB), also in force from 1 October 2026, shortened the periods before they ever applied:

Two rules stay as they were. A bank (an Authorised Dealer) may extend the period if the exporter asks, citing reasons for the delay, and the bank is satisfied with them. And under Regulation 13, if export proceeds remain unrealised for more than one year beyond the due date, or the extended date, the exporter may export further only against full advance payment or an irrevocable letter of credit. The amendment adds that exporters on RBI’s Caution List as on 30 September 2026 remain governed by RBI’s earlier orders until they are removed from the list.

In practice, nine months is not new. An amendment dated 5 June 2026 (Notification No. FEMA 23(R)/(8)/2026-RB) had already cut the period under the 2015 regulations from fifteen months to nine, and the Master Direction on export of goods and services gives nine months from the date of export. The September amendment stops the January text’s fifteen months from taking effect.

2. A 20 per cent reserve on large rupee hedges that buy foreign currency

A.P. (DIR Series) Circular No. 26 dated 10 October 2026 requires Authorised Dealers to maintain an FERR for rupee foreign exchange derivative contracts they undertake with users. RBI’s FAQs of 15 October 2026 fill in the detail:

The FAQs exclude contracts where the user sells foreign currency, hedges of capital account transactions and of interest, coupons or dividends arising from them (such as interest on an external commercial borrowing), contracts not involving the rupee, and contracts entered into before the directions. The circular treats any attempt by users to get around these conditions, including the USD two million threshold, through multiple transactions with one or more banks as a violation. Circular No. 27 of 12 October 2026 extended the reserve to banks’ own hedges of their assets and liabilities where they buy foreign currency against the rupee, and limited non-deliverable rupee derivatives for non-residents to hedging.

3. No rebooking, and a USD 5 million limit for hedging without evidence

A.P. (DIR Series) Circular No. 25 dated 10 October 2026, in force with immediate effect, changes how banks apply the Master Direction – Risk Management and Inter-Bank Dealings:

The circular makes each bank responsible for ensuring compliance, including the existence of the underlying exposure, and requires it to keep the necessary documents for at least two years. The Master Direction already said that users within the limit must still have a valid contracted exposure, not hedged elsewhere, and be able to establish it if required.

Who is affected

• Exporters of goods, services and software, including startups billing overseas clients. Exports other than project exports run on a nine-month clock (twelve for rupee invoicing), which also fixes the Regulation 13 date. Hedges that sell foreign currency carry no reserve, but the rebooking ban and the USD 5 million limit apply.
• Importers and others buying foreign currency to hedge current account transactions, such as imports of goods or services. Each such rupee contract with a bank above USD 2 million, booked after the directions, attracts the reserve, along with the rebooking ban and the evidence rules.
• Companies with external commercial borrowings. Hedges of capital account transactions are outside the reserve (FAQ 5), and so are hedges of interest and similar flows arising from a capital account transaction (FAQ 6). The rebooking ban and evidence rules still apply.

Not affected: contracts between two foreign currencies, such as EUR/USD, which fall outside all three hedging changes. Rupee contracts of USD 2 million or less, and contracts booked before 10 October 2026 and not rolled over since, carry no reserve.

Worked example

An exporter’s deadline

A software startup invoices a US client in US dollars on 15 October 2026. Counting from 19 October 2026:

1. Services, including software, invoiced in foreign currency: nine months from the date of invoice under Regulation 5(1)(a).
2. Nine months from 15 October 2026 is 15 July 2027. On 19 October 2026, 269 days remain.
3. The Export Declaration Form (EDF) for services is due within 30 days from the end of the month of the invoice: 31 October 2026 plus 30 days is 30 November 2026.
4. If the money is still unrealised after 15 July 2028, one year beyond the due date, Regulation 13 allows further exports only against full advance payment or an irrevocable letter of credit.
5. Had the invoice been in rupees, the deadline would be twelve months from the invoice, 15 October 2027. Under the fifteen months in the January text, the dollar invoice’s deadline would have been 15 January 2028.

An importer’s hedge

An importer with a contracted payment to an overseas supplier books a USD 3 million forward with its bank on 20 October 2026 to buy dollars on 18 January 2027. We assume a contracted rate of ₹95 per USD, the rate RBI uses in its own FAQ example. The importer already has USD 2.5 million of hedges outstanding with other banks, booked without showing documents.

1. Reserve test: a rupee contract with a bank, buying foreign currency to hedge a current account transaction, notional USD 3 million (above USD 2 million), booked after 10 October 2026. The reserve applies.
2. Rupee equivalent of the notional: USD 3,000,000 × ₹95 = ₹28,50,00,000 (₹28.50 crore).
3. Reserve: 20 per cent of that is ₹5,70,00,000 (₹5.70 crore). The bank keeps it with RBI, interest-free, from the working day after 20 October 2026 until a day after the contract ends, about 90 days.
4. Evidence: USD 2.5 million already outstanding plus USD 3 million makes USD 5.5 million, above the USD 5 million limit, so the importer should expect to establish the underlying exposure. Under the old USD 100 million limit, it would have stayed within the no-evidence facility.
5. Undertaking: required, confirming the payable is not hedged with another bank.
6. Rebooking: if the importer cancels this forward, it cannot rebook it. It can roll it over at maturity, but the rolled-over contract counts as a fresh contract, so the reserve would apply again if the conditions are met.

An exporter selling the same USD 3 million forward against a contracted receivable, with nothing else outstanding, would face no reserve and no evidence requirement up front, but would still give the undertaking and be bound by the rebooking ban.

Calculate your export realisation deadline

Choose the type of export and its invoicing currency, then enter the date of shipment, invoice or sale from the warehouse, and any extension your bank has allowed. You get the deadline, days left, the EDF date for services and the Regulation 13 date.

Check a forex hedge against the new rules

Describe one contract: where it is booked, whether you buy or sell foreign currency, what it hedges, its notional in USD equivalent, the contracted rate and its dates, plus what you already have outstanding without documents. The checker shows the reserve, the evidence position and the rebooking position.

What to do now

1. List open export receivables with their shipment or invoice dates, work out the nine-month (or twelve-month) dates, and chase the earliest first. For service exports, also diary each EDF date.
2. Check customer credit terms against nine months. If a payment will be late, ask your bank early for an extension, citing reasons; it can extend only if satisfied with them.
3. Add up your outstanding rupee hedges across all banks, and separately across all exchanges, and compare them with USD 5 million. Keep contracts, orders and invoices ready to establish exposures.
4. Before cancelling any rupee hedge, decide whether you may need cover again. A cancelled contract cannot be rebooked, so consider holding to maturity or rolling over instead.
5. For foreign currency purchases above USD 2 million, ask your bank how it will quote hedges that carry the reserve. Do not split a hedge to stay under the threshold.
6. Review your hedging policy with your bank and adviser.

Key dates

What the rules don’t say yet

• What counts as rebooking. The circular does not define it, or say whether a new hedge of the same exposure after a cancellation is a rebooking. Ask your bank before you cancel.
• Older positions. The circular does not say how positions above USD 5 million taken earlier under the USD 100 million limit are treated.
• Counting months and older exports. The regulations do not say how to count a month, or how the period applies to exports made before 1 October 2026. Confirm older receivables with your bank.
• Contracts struck on 10 October 2026. The reserve and the rebooking ban turn on what happened after the directions were issued that day, so check same-day deals with your bank.

Frequently asked questions

Do I pay the 20 per cent reserve?

Not directly. The reserve is kept by the bank, in cash with RBI, for the life of the contract, and it earns no interest. The circular and FAQs say nothing about pricing, so ask your bank how it will quote large hedges that buy foreign currency.

Does the reserve apply to an exporter’s forward sales?

No. RBI’s FAQ says the reserve applies only where the user buys foreign currency against the rupee. The rebooking ban and the USD 5 million evidence limit still apply to exporters.

Can I book two USD 1.5 million contracts instead of one USD 3 million contract?

The USD 2 million test applies contract by contract, but the circular treats any attempt to get around the threshold through multiple transactions with one or more banks as a violation, and the FAQs tell banks to guard against such structuring.

What happens if my overseas customer pays late?

Ask your bank to extend the realisation period, giving reasons for the delay. If the proceeds stay unrealised for more than one year beyond the due date or the extended date, further exports are allowed only against full advance payment or an irrevocable letter of credit.

Do I need documents for a USD 1 million hedge?

Not up front, if your outstanding hedges taken without evidence stay within USD 5 million across all banks. You still give the undertaking, must have a valid contracted exposure, and your bank may ask for documents.