Summary:The Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023, as amended in 2025 and issued by the Reserve Bank of India (RBI) under the powers granted by the FEMA Act, 1999, govern how Indian residents transact in foreign exchange with non-residents. Foreign exchange includes foreign currency, drafts, credits, and other instruments payable in foreign or Indian currency. The core regulation stipulates that all receipts and payments must be made strictly according to RBI rules, regulations, and permissions, primarily through an Authorised Bank or Authorised Person. For trade transactions, payments for imports and exports with Nepal and Bhutan are generally in Indian Rupees, while transactions with ACU member countries use the ACU mechanism. For all other countries and non-trade transactions (except overseas investment in Bhutan), receipts and payments can be made in either Indian Rupees or any foreign currency. Payments and receipts in India for current account transactions (other than trade) involving a non-resident visitor must be made only in Indian Rupees.
Provisions in respect of manner of receipt and payment in foreign exchange are contained in Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023 as amended by Foreign Exchange Management (Manner of Receipt and Payment) (Amendment) Regulations, 2025.
- What is Foreign Exchange Management?
- Clause n to Section 2 of FEMA states that foreign exchange means foreign currency and includes:
i. Deposits, credits and balance payable in any foreign currency
ii. Drafts, traveller’s cheque, letter of credit or bill of exchange expressed or drawn in Indian currency but payable in foreign currency
- Drafts, traveller’s cheques, letter of credit or bill of exchange drawn by banks, institutions or persons outside India, but payable in Indian currency.
Question: Which Authority has power to issue Regulation in relation to FEMA (Manner of Receipt and Payment) Regulations, 2023?
Answer: Reserve Bank of India has empowered by FEMA Act 1999 to issue regulations and regulate the full control of receipt and payment in foreign currency.
Manner of Receipts and Payment to person resident out of India by person resident in India
The Receipt and payment of foreign exchange by person resident in India shall be only as per RBI Rules, Regulations and Permission. Save as otherwise in a manner as provided in FEMA Act or the rules or regulations made or directions issued under FEMA Act 1999, no person resident in India shall make or receive payment from a person resident outside India.
Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023
In exercise of the powers conferred by Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), The Reserve Bank of India makes the following regulations, namely:
1. Short title and commencement.
(1) These regulations shall be called the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023.
(2) They shall come into force on 21 December 2023.
2. Definitions. –
(1) In these regulations, unless the context otherwise requires-
i. ‘Act’ means the Foreign Exchange Management Act, 1999 (42 of 1999);
ii. ‘Authorised Bank’ shall have the same meaning as given in the Foreign Exchange Management (Deposit) Regulations, 2016 as amended from time to time.
(2) The words and expressions used but not defined in these regulations shall have the same meanings respectively assigned to them in the Act.
3. Manner of receipt and payment. –
(1) Save as otherwise in a manner as provided in the Act or the rules or regulations made or directions issued under the Act, no person resident in India shall make or receive payment from a person resident outside India:
Provided that the Reserve Bank may, on an application made to it, permit a person resident in India to make or receive payment under the Act.
(2) The receipt and payment between a person resident in India and a person resident outside India shall, unless provided otherwise, be made through an Authorised Bank or Authorised Person and in the manner as specified below:
(I) Trade transactions –
(a) receipt/payment for export to or import from the countries given below of eligible goods and services shall be made as under:
(i) Nepal and Bhutan – in Indian Rupees provided that in case of exports from India where the importer in Nepal has been permitted by the Nepal Rashtra Bank to make payment in foreign currency, such receipts towards the amount of the export may be in foreign currency;
(ii) Member countries of ACU, other than Nepal and Bhutan – In respect of payments from a resident in the territory of one participant country to a resident in the territory of another participant country, through ACU mechanism, or as per the directions issued by the Reserve Bank to authorised dealers from time to time. For all other transactions, receipt and payment may be made in a manner as specified at (iii) below.
(iii) Countries other than member countries of ACU – In Indian Rupees or in any foreign currency.
(b) Notwithstanding anything contained in this sub-regulation, receipts and payments may also be made in a manner as may be provided in the extant Foreign Trade Policy framed by the Central Government.
Explanation: The expression ‘ACU’ (Asian Clearing Union) shall have the same meaning assigned to it under Article I of the ACU agreement and the ACU mechanism shall be construed accordingly.
(II) Transactions other than trade transactions – receipt and payment shall be made as under:
(i) Nepal and Bhutan – In Indian Rupees provided that in case of overseas investment in Bhutan, payment may also be made in foreign currency;
(ii) Other Countries – In Indian Rupees or any foreign currency.
(3) Payment and receipt in India for any current account transaction, other than a trade transaction, between any person resident in India and a person resident outside India, who is on a visit to India, may be made only in Indian Rupees.
Provided that any payment or receipt under regulation 3 may also be made by debit/ credit to a bank account maintained in terms of the rules, regulations or directions issued under the Act.
Author Bio
