RBI Extends Time Limit for Foreign Exchange Outlay in Merchanting Trade Transactions to Six Months [Read Announcement]
RBI has extended the time period for foreign exchange outlay in Merchanting Trade Transactions (MTT) from four months to six months, while retaining the overall nine-month completion period
The Reserve Bank of India (RBI), through its A.P. (DIR Series) Circular No. 11 dated October 1, 2025, has announced a relaxation for Merchanting Trade Transactions (MTT) by extending the time period for foreign exchange outlay from four months to six months.
This change has been introduced to provide greater flexibility to merchanting traders in managing their transactions and foreign exchange exposures efficiently.
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Earlier, as per A.P. (DIR Series) Circular No. 20 dated January 23, 2020, the RBI had stipulated that every merchanting trade transaction must be completed within nine months and that the outlay of foreign exchange (that is, the time for which payment for the import leg remains outstanding before export proceeds are realized) must not exceed four months.
After a review, RBI has now decided to increase this time limit to six months, while keeping all other existing provisions unchanged.
Under the revised guidelines, merchanting trade transactions must still be completed within nine months from the commencement date, which is defined as the earlier of (a) the date of shipment or receipt of export proceeds, or (b) the date of payment for the import leg. The transaction is considered complete on the later of these two events.
By extending the time limit for the foreign exchange outlay, the RBI aims to give traders more time to manage cash flows, especially in cases where export receipts are delayed or import payments require early settlement.
This move is expected to improve ease of doing business and help Indian traders participate more effectively in global supply chains.
The circular has been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 and is effective immediately. All Authorised Dealer (AD) Category-I Banks have been instructed to bring this change to the notice of their customers engaged in merchanting trade.
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