The Reserve Bank of India has, with effect from October 1, 2026, handed a significant new authority to Authorised Dealer (AD) banks: the power to process and decide legacy export-import and merchanting trade transactions that previously required RBI's own approval. This change, introduced through Regulation 20 inserted into the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 vide Notification No. FEMA 23(R)/(1)/2026-RB dated September 22, 2026, represents a meaningful step toward decentralisation of forex administration in India.
For businesses and banks dealing with pre-October 2026 transactions that were languishing in the RBI approvals pipeline, this is a welcome and practical relief.
Background: How the Old Approval System Worked
Under the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015, and the two Master Directions that governed export and import transactions (Master Direction No. 16/2015-16 dated January 1, 2016 on Export, and Master Direction No. 17/2016-17 dated January 1, 2016 on Import), certain categories of forex transactions could not be processed by banks on their own authority. They required the specific approval of the Reserve Bank of India.
These included complex or non-standard situations in export-import and merchanting trade: cases where the facts did not fit neatly within the four corners of the standard bank-level permissions. In such cases, the exporter or importer, through their AD bank, would write to the Foreign Exchange Department of RBI, Central Office, and wait for a ruling.
The process was often slow. RBI's approvals queue carried significant backlog, and businesses with legitimate pending matters, whether involving delayed realisation, complex merchanting trade structures, or other non-standard situations, found themselves in a holding pattern with no certainty on timelines. The AD bank, meanwhile, had no authority to act until RBI spoke.
What Regulation 20 Says, and What It Means
The new Regulation 20, inserted into the principal FEMA export-import regulations with effect from October 1, 2026, reads as follows (in substance):
Authorised Dealers shall handle transactions related to the export and import of goods and services, as well as merchanting trade, undertaken prior to October 01, 2026, which hitherto required approval of the Reserve Bank of India.
In plain terms, this means:
- Any export, import, or merchanting trade transaction that was entered into before October 1, 2026 and which, under the old 2015 regulations or the Master Directions, needed RBI's prior or post-facto approval, can now be handled and concluded by the AD bank directly.
- The AD bank does not need to refer such cases to RBI for approval anymore.
- The authority to process, examine, and close such transactions now vests with the Authorised Dealer.
This is a classic instance of what RBI has been doing progressively over the last several years: pushing decision-making authority downward to the bank level, reducing RBI's role as an approving authority, and converting itself from a transactional gatekeeper into a policy-setter and supervisor.
Who Benefits, and How
This change will be felt most directly by the following:
Exporters with pending matters at RBI: If you have a case where your AD bank had already submitted a representation or approval request to RBI under the old Export Master Direction, on realisation timelines, write-off requests, or other non-standard export situations, that case can now be processed by the bank itself. You do not need to wait for RBI to respond.
Importers with unresolved approval requests: Similarly, import transactions that required RBI nod under the old Import Master Direction, advance payment structures, import from certain destinations, certain categories of service imports, can now be concluded at the AD bank level.
Merchants engaged in third-country trade: Merchanting trade transactions, which often involved complex routing of documents and payments and occasionally needed RBI's sign-off under the old framework, are also covered. AD banks can now take a view on the transaction themselves.
AD Banks themselves: The empowerment is also significant for the banks. They now carry direct responsibility for examining and processing these legacy cases, which calls for stronger internal expertise and a well-calibrated risk framework at the bank level.
The practical outcome for businesses is straightforward: faster resolution, greater certainty, and reduced dependence on a centralised queue that had no guaranteed turnaround time.
What Businesses with Pending Legacy Cases Should Do Now
If you or your business have a pre-October 2026 export, import, or merchanting trade matter that was pending before RBI for approval, here is what we recommend:
- Identify the pending matter clearly. Pull out the original representation or approval request filed with RBI through your AD bank. Note the date of the transaction, the nature of the approval sought, and whether it falls under the Export or Import Master Direction.
- Approach your AD bank proactively. Since the authority has now shifted to the AD bank, do not wait for RBI to revert. Engage your bank's forex or trade finance desk and request them to process your matter under the new Regulation 20 framework.
- Ensure documentation is in order. The AD bank will still need to satisfy itself on the merits of the transaction. Ensure that all supporting documents, contracts, invoices, shipping documents, correspondence, are available and organised.
- Seek specialist advice where needed. The shift in authority does not mean that any and every transaction will be automatically approved at the bank level. The bank must examine the matter on its merits within the FEMA framework. Where the transaction involves complexity, uncommonly structured merchant trade, delayed realisation with write-off implications, or service imports with transfer pricing angles, professional guidance will be valuable in presenting the matter correctly to the AD bank.
Regulation 20 is a quiet but significant regulatory development. It does not generate headlines the way a realisation timeline change does, but its practical impact on businesses with pending legacy matters is immediate and real. By empowering AD banks to handle what was previously an RBI-level function, the notification reduces a structural bottleneck in India's forex administration and brings the framework closer to the ground, where transactions actually happen.
This is consistent with the broader direction that RBI has set over recent years: fewer central approvals, more bank-level empowerment, and a sharper focus on systemic oversight rather than transaction-by-transaction gatekeeping.
For exporters, importers, and trading houses with unresolved pre-October 2026 matters, the message is simple: your AD bank can now help you close these out.
