Under the earlier Regulation 5(CA) of the Principal Regulations, exporters were permitted to open and maintain foreign currency accounts outside India solely for the purpose of realisation of export proceeds and receipt of advance remittances. The utilisation of such funds was restricted to payments towards imports into India or required to be repatriated to India within one month from the date of receipt, subject to compliance with Regulation 9 of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015.
The 2025 Amendment introduces several material refinements to this framework:
1. Extended Retention Period:
Exporters maintaining foreign currency accounts with banks located in IFSC may now retain export proceeds for a period of up to three months, as against the earlier limit of one month. This provides exporters with greater operational flexibility for meeting import obligations and managing foreign exchange exposures.
2. Jurisdictional Distinction:
The amended regulation establishes a clear distinction between accounts maintained in IFSCs and those held in other foreign jurisdictions. While the one-month retention period continues to apply to the latter, accounts maintained in IFSCs benefit from a three-month retention window, thereby conferring a regulatory advantage on IFSC-based banking operations.
3. Dynamic Cross-Referencing:
The earlier regulation referred specifically to Regulation 9 of the Export of Goods and Services Regulations, 2015. The amended version, however, makes a dynamic reference to the said regulations “as amended from time to time.” This change obviates the need for future technical amendments each time the underlying export regulations are revised, ensuring regulatory continuity.
4. Legal Recognition of IFSCs:
The insertion of an Explanation at the end of Regulation 5 formally integrates IFSCs within the ambit of FEMA’s foreign currency account framework. For this purpose, IFSCs are now deemed equivalent to jurisdictions “outside India,” thereby resolving prior interpretive ambiguities.
