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RBI Notifies the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023


The Reserve Bank of India (‘RBI’), exercising its powers conferred by s. 47 of the Foreign Exchange Management (‘FEM’) Act, 1999 has issued the FEM (Manner of Receipt and Payment) Regulations, 2023[i] (‘Regulations’), thereby superseding the erstwhile notification FEMA 14(R)/2016-RB dated 02.05.2016. These Regulations came into force on 21.12.2023 and are designed to rationalize the process of payments and receipts involving Indian residents and non-residents, offering lucidity and guidance to individuals and entities engaged in various types of transactions.

Manner of Receipt and Payment

The core of these regulations lies in delineating the procedures for conducting payments and receipts between Indian residents and non-residents. The key provisions include:

  • Authorised Banks and Persons

    • The regulations stipulate that transactions between residents in India and non-residents must go through an authorised bank or an authorised person, ensuring a regulated foreign exchange channel. The term ‘authorized bank’ aligns with its definition in the FEM (Deposit) Regulations, 2016. Additionally, no Indian resident can make or receive payments from a non-resident without adherence to the FEM Act, rules, or regulations. The RBI may permit such transactions upon application.

  • Trade Transactions

    • Transactions with Nepal and Bhutan are to be conducted in Indian Rupees unless the importer in Nepal is authorized by the Nepal Rashtra Bank to pay in foreign currency.

    • Member countries of the Asian Clearing Union[ii] (‘ACU’), excluding Nepal and Bhutan, are subject to ACU mechanisms or as per RBI directions issued to authorised dealers from time to time.

    • Transactions with countries outside the ACU may be conducted in Indian Rupees or any foreign currency.

  • Transactions other than Trade Transactions

    • Transactions other than trade, including overseas investments, are subject to specific rules. Payments to and from Nepal and Bhutan are generally made in Indian Rupees, except in instances where the use of foreign currency is permitted for overseas investments in Bhutan.

    • For transactions with countries other than Nepal and Bhutan, payments can be made in Indian Rupees or any foreign currency.

  • Current Account Transactions

    • Payments and receipts in India for current account transactions, excluding trade transactions, between residents and non-residents visiting India, are to be made only in Indian Rupees.

    • However, the regulations permit such transactions through debit/credit to a bank account maintained in accordance with the rules, regulations, or directions issued under the FEM Act.


The regulations establish a comprehensive framework for overseeing foreign exchange transactions in India. By articulating precise guidelines for the making of payments and receipts, the regulations strive to guarantee transparency, accountability, and regulatory oversight in cross-border transactions. Market participants, encompassing individuals and businesses involved in international trade, are strongly encouraged to acquaint themselves with these regulations. This understanding is vital to ensure compliance and promote smooth cross-border transactions within the legal framework. Compliance with these regulations is essential for fostering a regulatory environment that upholds the integrity and legality of cross-border financial activities.

End Notes

[i] Vide Notification No. - FEMA 14(R)/2023-RB dated 21.12.2023.

[ii] The term ACU has the same meaning assigned to it under Article I of the ACU Agreement and the ACU mechanism is construed accordingly.

Authored by Nitish Solanki, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.


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