The Indian government has introduced new amendments to its Foreign Trade Policy (FTP) 2023 that allow exporters to settle export contracts in Indian rupees, reducing reliance on the US dollar. Announced on August 20, 2026, these revisions aim to modernize trade settlement norms and streamline benefit eligibility across international commerce.
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## What Has Changed
The Directorate General of Foreign Trade (DGFT) has updated two key provisions of FTP 2023 to align export contract denomination and the eligibility for FTP benefits with the Foreign Exchange Management (Manner of Receipt and Payment) Regulations of 2023. These amendments permit exporters to invoice and settle exports in Indian rupees or any foreign currency when dealing with countries outside the Asian Clearing Union (ACU). Previously, most export proceeds had to be paid in freely convertible foreign currencies.
For member countries of the ACU—Bangladesh, Iran, Maldives, Myanmar, Pakistan, and Sri Lanka—contracts must use a currency specified by the ACU. However, the DGFT notification also states that invoicing and settlements can follow directives of the Reserve Bank of India (RBI) in these cases. Nepal and Bhutan are treated separately; contracts with these nations must always be denominated and settled in Indian rupees or per RBI guidance.
Exports financed under EXIM Bank or Government of India lines of credit are also now eligible for rupee invoicing.
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## Implications for Exporters
### Benefit Eligibility Equalized
Economic think tank Global Trade Research Initiative (GTRI) explains that export payments made in rupees via authorised banking channels will now receive FTP benefits identical to those settled in foreign currency. These rupee proceeds can also count toward fulfilling export realisation obligations.
### Reduced Costs and Risk
Invoicing and settling in rupees could help exporters cut down on currency conversion expenses and reduce exposure to exchange-rate fluctuations—issues that have long affected trade contracts denominated in foreign currencies.
### Support for Dollar-Constrained Partners
This reform is particularly relevant for trading partners facing shortages of dollars or struggling to access standard international payment systems. By enabling alternative settlement methods, India hopes to facilitate smoother trade even under restrictive forex conditions.
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## Broader Goals: Promoting International Usage of the Rupee
GTRI believes that this regulatory change could significantly enhance the rupee’s role internationally. Allowing contracts and invoicing in rupees weakens dependence on the US dollar or other freely convertible currencies.
That said, Ajay Srivastava—founder of GTRI—points out that regulatory changes alone aren’t sufficient. A range of infrastructure must support widespread rupee adoption, including:
– Country-specific settlement mechanisms
– Efficient banking processes
– Affordable hedging tools
– Rupee-denominated export credit
– Export Credit Guarantee Corporation (ECGC) protections
Without these, rupee invoicing might remain a niche option rather than become mainstream.
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## Details on ACU Member Transaction Rules
The Asian Clearing Union, formed in 1974, currently includes nine countries: Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka. It was established to minimize repeated foreign exchange transfers and simplify net settlement obligations among its members.
Export contracts with ACU members—except Nepal and Bhutan—must use an ACU-designated currency or comply with RBI directions. Transactions with Nepal and Bhutan must be denominated and settled in rupees or as per RBI instructions. Sensitive items, especially those tied to nuclear activities or related technologies, must comply with existing FTP paragraph 2.19 requirements to align with global norms and obligations. This especially pertains to India’s commitments under UN Security Council Resolution 2231 and the International Atomic Energy Agency’s rules.
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The new rules reflect a broader shift in India’s trade finance strategy by acknowledging rupee-denominated export proceeds. They align trade policy with recent foreign exchange regulations and offer exporters greater flexibility in settling contracts—especially with nations under currency resource stress. Should India build the required supporting systems, the rupee could gradually assume a larger role in global trade settlements.
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