Introduction

India’s foreign exchange regulatory framework has evolved considerably over the past two decades, keeping pace with the increasing volume and complexity of cross-border transactions. As the regulatory framework has developed, several older circulars have become redundant, been superseded by subsequent regulations, or ceased to have practical relevance.

Against this backdrop, the Reserve Bank of India (“RBI”), on 8 September 2026, issued A.P. (DIR Series) Circular No. 21, withdrawing seven earlier circulars issued under the Foreign Exchange Management Act, 1999 (“FEMA”). The measure forms part of RBI’s ongoing initiative to rationalize and streamline the FEMA regulatory framework.

While the withdrawal of these circulars does not introduce a new substantive compliance requirement by itself, it is an important development for businesses, authorized persons and legal professionals dealing with cross-border transactions.

What has RBI changed?

The latest circular withdraws seven such legacy circulars, covering areas including:

  • ECBs denominated in Indian Rupees;
  • the definition of the infrastructure sector for ECB purposes;
  • certain borrowing and lending transactions involving rupee-denominated bonds;
  • import of services, technical know-how and license fees under the earlier ECB framework;
  • the Money Transfer Service Scheme; and

Why is this important?

At first glance, withdrawal of obsolete circulars may appear to be a housekeeping exercise. However, regulatory clarity is particularly important in the foreign exchange space because businesses frequently rely on a combination of FEMA provisions, RBI directions, regulations, circulars and administrative guidance when structuring cross-border transactions.

A fragmented regulatory history can create uncertainty when an organization attempts to determine whether an older circular remains relevant to a transaction.

What does this mean for businesses?

1. Old circulars should not be relied upon without checking their current status

Companies undertaking cross-border transactions often maintain internal compliance manuals, transaction checklists and precedent documentation that may have been developed several years ago.

The withdrawal of legacy circulars highlights the importance of periodically reviewing such material.

A provision or circular that was relevant when a transaction structure was originally developed may no longer represent the current regulatory position.

2. Cross-border financing structures require current-law analysis

The withdrawal of several historical ECB-related circulars is particularly relevant for companies involved in foreign currency or rupee-denominated financing.

Businesses should distinguish between:

  • historical transactions undertaken under an earlier regulatory framework; and
  • new transactions that must be evaluated under the regulations and directions currently in force.

3. Legal due diligence should include regulatory currency checks

FEMA compliance is not limited to determining whether a transaction was permissible when it was undertaken.

For transactions involving continuing obligations—such as reporting, downstream investment, guarantees, overseas investment, foreign borrowing or repatriation—legal teams should verify the regulatory framework applicable at the relevant point in time.

This is particularly important during:

  • M&A transactions;
  • investment by non-residents;
  • overseas investment;
  • cross-border restructuring;
  • ECB transactions;
  • share transfers involving non-residents; and

What does the withdrawal not mean?

It is important not to interpret the withdrawal of these seven circulars as a relaxation of FEMA compliance generally.

Further, the latest circular states that the directions are issued under Sections 10(4) and 11(1) of FEMA and are without prejudice to permissions or approvals that may be required under any other law.

Accordingly, businesses should not assume that the withdrawal of an older circular removes the underlying regulatory requirement where that requirement is now governed by another applicable regulation, direction or framework.

What should companies do now?

Companies with significant cross-border operations may consider undertaking a periodic FEMA regulatory review covering:

1. Existing compliance manuals

Review internal FEMA policies, checklists and standard operating procedures for references to withdrawn or superseded circulars.

2. Transaction templates

Examine precedent agreements and transaction documents involving FDI, ODI, ECBs, guarantees, share transfers and other cross-border arrangements.

3. Historical transactions

Where a transaction was undertaken under an earlier FEMA framework, maintain a clear record of the regulatory provisions applicable at the relevant time.

4. Legal due diligence

For M&A and investment transactions, include a review of FEMA compliance history, particularly where the target has undertaken significant cross-border transactions.

5. Coordination with authorised dealer banks

Businesses should ensure that their FEMA positions are aligned with the requirements and documentation expected by the relevant Authorised Dealer bank.

The road ahead

The continuing review of FEMA circulars is significant not because it changes the fundamentals of foreign exchange regulation overnight, but because it contributes to cleaner and more navigable regulatory architecture.

For businesses operating across jurisdictions, regulatory certainty is itself an important component of transaction planning. As RBI continues its review, companies and advisers would benefit from keeping their FEMA compliance frameworks aligned with the current operating regulations and directions, rather than relying on historical regulatory material.

Conclusion

RBI’s latest withdrawal of seven legacy FEMA circulars is a reminder that regulatory compliance is not static. As the foreign exchange framework evolves, businesses must ensure that their internal policies, transaction structures and legal assessments evolve with it. The larger message is straightforward: in a changing cross-border regulatory environment, knowing what no longer applies can be just as important as knowing what does.

Author: Sarika Aggarwal (Head – Advisory & International Relations)

FAQs

What has RBI changed through the September 2026 FEMA circular?

RBI has withdrawn seven earlier circulars issued under FEMA that had become inoperative due to subsequent regulatory amendments, redundancy, overlap or supersession. The move forms part of RBI’s continuing exercise to rationalise FEMA-related circulars.

No. The withdrawal primarily concerns circulars that are no longer operative. Businesses must continue to comply with the applicable FEMA regulations, rules, directions and other regulatory requirements currently in force.

Not necessarily. The withdrawal of a circular does not, by itself, invalidate a transaction that was lawfully undertaken under the regulatory framework applicable at that time. However, businesses should examine any continuing obligations associated with such transactions under the current framework.

The September 2026 circular withdraws several historical ECB-related circulars. However, companies undertaking ECB transactions should refer to the currently applicable ECB framework rather than relying on the withdrawn circulars.

Companies should examine FEMA requirements applicable to the transaction, including those relating to foreign investment, pricing, reporting, share transfers, downstream investment, overseas investment, guarantees and other relevant aspects, depending on the structure of the transaction.

Businesses should avoid relying solely on historical FEMA circulars or precedent advice. For every new transaction, the applicable current FEMA framework should be identified and the transaction structure, documentation and compliance requirements assessed accordingly.

No. In fact, continuing changes to the FEMA framework reinforce the importance of checking the regulatory status of provisions relied upon during transaction planning and due diligence.