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India's banking, forex, and digital payment rule changes take effect

India's banking, forex, and digital payment rule changes take effect

Rule Changes

October 1 banking and forex overhaul settles in as RBI widens rupee-defense reserve

October 17th, 2026: RBI says individuals exempt from new FEMA reporting

Overview

Updated Oct 16

A month into India's new financial rulebook, the Reserve Bank of India has widened a 20% cash reserve on foreign-exchange derivatives to cover all rupee-linked contracts used by banks. It also restricted non-deliverable forwards to hedging only, as the rupee trades near 97 to the dollar.

Banks have asked the RBI how to calculate the reserve and what it does to liquidity ratios. On October 17, Governor Sanjay Malhotra said individuals making personal cross-border payments are not covered by new FEMA reporting rules. Exporters still face a nine-month deadline to bring home proceeds.

Why it matters

Exporters face a nine-month deadline, banks must hold a 20% cash reserve on rupee hedges, and personal cross-border payments are exempt from new reporting.

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Key Indicators

9 months
Export realisation window
Cut from 15 months to 9 for most exports under the new FEMA rules.
₹3 crore
Bulk deposit threshold
Deposits above this qualify as bulk; the threshold was raised from ₹2 crore.
5
SBI free monthly ATM transactions
Halved from 10 for salary account holders at other banks' ATMs.
₹2,000
UPI merchant fee threshold
Merchant Discount Rate applies above this amount from October 15.
20%
Foreign Exchange Risk Reserve
On rupee-linked FX derivative contracts above $2 million notional; widened to all bank contracts on October 16.

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People Involved

Sanjay Malhotra
Sanjay Malhotra
Governor, Reserve Bank of India
Said individuals are exempt from new FEMA reporting requirements

Organizations Involved

Reserve Bank of India
Reserve Bank of India
Central bank
Widened the 20% Foreign Exchange Risk Reserve to all rupee-linked FX derivative contracts and restricted non-deliverable forwards to hedging; its governor said individuals are exempt from new FEMA reporting

India's central bank, responsible for monetary policy and banking regulation.
Ministry of Finance
Ministry of Finance
Government ministry
Notified commencement of the Bankers' Books Evidence Act, 2026

Indian government ministry that oversees economic policy, taxation, and financial legislation.
State Bank of India
State Bank of India
Public Sector Bank
Reduced free ATM transactions for salary account holders

India's largest public-sector bank, with the most extensive branch network in the country.

Timeline

January 2026 October 2026

11 events Latest: October 17th, 2026 · 4 weeks ago Showing 8 of 11
Tap a bar to jump to that date

  1. RBI says individuals exempt from new FEMA reporting

    Latest Regulation

    Governor Sanjay Malhotra said individuals making personal cross-border payments will not be covered by the new FEMA reporting requirements.

  2. RBI widens forex risk reserve, restricts NDFs to hedging

    Regulation

    The RBI extended the 20% Foreign Exchange Risk Reserve to all rupee-linked FX derivative contracts used by authorised banks and limited non-deliverable forwards to hedging.

  3. UPI merchant fee framework applies

    Regulation

    Merchant Discount Rate applies to UPI transactions above Rs 2,000.

  4. Banks seek RBI relief on new forex rules

    Regulation

    Lenders reportedly ask the RBI to clarify or modify the new forex measures, flagging possible double counting of the 20% reserve on client and interbank legs of the same transaction.

  5. RBI imposes forex measures including 20% reserve

    Regulation

    RBI issues two circulars imposing a 20% Foreign Exchange Risk Reserve on rupee-linked FX derivatives above $2 million notional and tightening rules on rebooking cancelled contracts, as the rupee neared 97 to the dollar.

  6. Freelancers hit by export declaration form burden

    Regulation

    Small service exporters and independent consultants say the new Export Declaration Form is a heavy compliance burden, with banks still unprepared for the transition.

  7. Banking, forex, and payments rules take effect

    Regulation

    Bulk-deposit pricing, stressed-asset accounting, digital evidence, and export rules go live.

  8. RBI shortens export-realisation window

    Regulation

    Amendment cuts ordinary window from 15 to 9 months before rules take effect.

  9. Finance Ministry sets start date

    Statement

    Ministry notifies October 1 as the Act's commencement date.

  10. Bankers' Books Evidence Act passes

    Legislation

    President approves the 2026 Act, replacing the 1891 evidence law.

  11. RBI notifies FEMA 23(R)/2026-RB

    Regulation

    Consolidated export-import regulations set a 15-month export-realisation window.

Scenarios

1

Exporters miss the 9-month window as collections slow

Possible Resolves by Q3 2027

Discussed by: Trade analysts at Indian export promotion councils and banking industry observers

The shortened window tightens cash-collection timelines for exporters, especially those with long supply chains or slow-paying buyers. Exporters already on the RBI caution list as of September 30 get transitional treatment, but new contracts face the nine-month deadline. If a meaningful share of export bills exceed the window, the RBI could extend deadlines or soften enforcement. The first full cohort of exporters hits the nine-month mark in mid-2027.

2

Bulk deposit rates diverge as banks price for funding risk

Likely Resolves by End of 2026

Discussed by: Banking analysts covering Indian lenders

The liquidity coverage ratio-linked framework lets banks price bulk deposits — those above Rs 3 crore — by their liquidity characteristics, so deposits expected to stay longer can command different rates. Banks must disclose rates daily by 10 am and offer uniform pricing for similar deposits on the same date. The transparency requirement could intensify competition for stable funding. Compare disclosed rates across major banks in the months after October.

3

UPI merchant fee above Rs 2,000 reroutes large payments

Uncertain Resolves by Q1 2027

Discussed by: Digital payments analysts and fintech trackers

From October 15, a Merchant Discount Rate applies to UPI merchant transactions above Rs 2,000. Large-ticket merchants — appliance sellers, travel agents, auto dealers — may shift to other payment instruments or renegotiate fees. NPCI transaction data will show whether UPI's share of large merchant payments changes.

4

RBI softens Foreign Exchange Risk Reserve after bank pushback

Likely Resolves by Dec 1, 2026

Discussed by: Treasury heads at Indian banks and foreign-exchange analysts

Banks have asked the RBI to clarify or modify the 20% FERR, flagging possible double counting on client and interbank legs of the same transaction. The RBI has not publicly confirmed any change. If it issues FAQs that narrow the reserve, hedging costs could fall. If not, banks may pass the higher costs to corporate clients.

5

Banks pass widened FX reserve costs to corporate hedgers

Likely Resolves by Q1 2027

Discussed by: Treasury heads at Indian banks and foreign-exchange analysts

The RBI widened the 20% Foreign Exchange Risk Reserve on October 16 to cover all rupee-linked derivative contracts used by authorised banks. Lenders have asked how to calculate the reserve and whether they can pass the cost to customers. If they do, importers and exporters could pay more to hedge currency risk.

Historical Context

3 moments from history that rhyme with this story — and how they unfolded.

May 2016

India's Insolvency and Bankruptcy Code (2016)

India replaced a patchwork of insolvency laws with the Insolvency and Bankruptcy Code, creating time-bound resolution for stressed companies. The law established the Insolvency and Bankruptcy Board of India and gave creditors a clear process.

Then

Resolution timelines became enforceable and banks gained a tool to process bad loans.

Now

The code reshaped India's credit culture and is credited with cleaning up non-performing assets in the banking system.

Why this matters now

The new Specified Non-Financial Assets framework standardizes how banks account for assets recovered from stressed borrowers, complementing the IBC's stress-resolution machinery.

June 2000

US E-SIGN Act (2000)

The US Electronic Signatures in Global and National Commerce Act made electronic signatures and records legally valid for interstate commerce, ending the requirement for paper documents in most transactions.

Then

E-commerce and digital contracting expanded rapidly.

Now

It set a template for other countries to recognize digital records in law.

Why this matters now

The Bankers' Books Evidence Act 2026 does for Indian banking what E-SIGN did for US commerce: it gives digital and cloud-based records the same legal weight as paper.

1991-1992

India's 1991 banking deregulation

As part of economic liberalization, India deregulated interest rates on deposits and lending, freeing banks to set rates based on market conditions rather than central directives.

Then

Competition for deposits increased across the banking system.

Now

It laid the foundation for market-driven banking that the 2026 bulk-deposit framework extends.

Why this matters now

The new liquidity coverage ratio-linked pricing framework refines this market-driven approach by letting banks price bulk deposits by their liquidity characteristics.

Sources

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Business World India Today Business Upturn The Times of India Tax Guru GGSH The Economic Times India TV News Free Press Journal Nation Path India The Wire ET BFSI The Indian Express The Hindu BusinessLine The Hindu Reserve Bank of India Reuters The Economic Times