The concerns were raised during a meeting between Reserve Bank of India (RBI) Governor Sanjay Malhotra and representatives of export promotion bodies on Thursday.
According to industry executives, the central bank indicated that it was receptive to several of the suggestions submitted by exporters and is examining them.
A key issue highlighted by the Federation of Indian Export Organisations (FIEO) relates to the availability of export credit. Industry data presented to the RBI showed that priority sector export credit had contracted 14% by February even as the country’s combined goods and services exports registered nearly 4% growth during the same period.
Exporters argued that the decline in credit availability has become a major constraint for businesses, particularly small and medium enterprises grappling with liquidity pressures.
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Industry bodies urged the RBI to ensure smoother flow of both pre-shipment and post-shipment finance at competitive borrowing costs.They also sought stronger transmission of the interest equalisation scheme benefits by banks, contending that lower policy rates have not translated into adequate credit support for exporters.
Among the most significant concerns is a proposed FEMA provision that would require exporters whose export proceeds remain unrealised beyond one year from the prescribed due date, or any extended timeline, to undertake future exports only after receiving full advance payment or an irrevocable letter of credit.
Exporters argued that such a blanket restriction could adversely affect companies with diversified overseas customer bases because a payment default by one overseas buyer would effectively constrain business with all other buyers. Instead, they proposed that the restriction should apply only to transactions involving the defaulting importer while allowing normal trade with compliant customers to continue.
Industry executives said the RBI responded positively to the suggestion and is examining the proposal.
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Merchanting trade has also emerged as an area requiring regulatory clarity. Exporters have recommended that transactions involving goods classified under restricted or prohibited export categories, but which do not physically enter or leave India, should be treated differently under the revised framework.
They argued that existing rules create unnecessary procedural hurdles for such offshore transactions.
Another operational issue relates to the Export Data Processing and Monitoring System (EDPMS). Exporters said shipping bills linked to markets facing international sanctions often remain pending because banks are reluctant to process the underlying trade documents owing to commercial and compliance risks.
This leaves transactions unregularised on the RBI’s monitoring platform despite exporters having limited control over the circumstances. Industry representatives have sought a review of the mechanism to enable closure of such pending cases.
The discussions assume significance as the central bank continues consultations with stakeholders before the revised FEMA framework is implemented. In recent interactions with industry, the RBI has maintained that simplifying foreign exchange regulations while preserving prudential safeguards remains a priority.
Exporters, meanwhile, are pressing for a framework that addresses compliance requirements without increasing transaction costs or restricting legitimate trade, particularly as India seeks to sustain export momentum amid a volatile global economic environment.