Content
Indepth analysis of RBI Circulars for October 2026
RBI Circulars October 2025
This lesson covers the key regulatory updates and circulars issued by the Reserve Bank of India in October 2025.
1. Merchanting Trade Transactions (MTT) – Review of time period for outlay of foreign exchange
What is a Merchanting Trade Transaction (MTT)?
Think of this as "Middleman Trading." An Indian trader buys goods from one foreign country and sells them to another foreign country, without the goods ever entering India.
Example:
- Indian Company (You): XY Limited (in India).
- Supplier: A seller in Canada.
- Buyer: A customer in the USA.
Process:
- You buy Laptops from Canada (Import Leg).
- You tell the Canadian seller: "Don't send them to India. Ship them directly to my customer in the USA."
- You sell the Laptops to the USA (Export Leg).
Key Exam Definition: In MTT, the goods do not enter the Domestic Tariff Area (DTA) of India.
Pro Content Locked
Upgrade to Pro to access this lesson and all other premium content.
₹99 charged monthly · Cancel anytime
- All Agriculture & Banking Courses
- AI Lesson Questions (100/day)
- AI Doubt Solver (50/day)
- Glows & Grows Feedback (30/day)
- AI Section Quiz (20/day)
- 22-Language Translation (100/day)
- Recall Questions (20/day)
- AI Quiz (15/day)
- AI Quiz Paper Analysis (100/day)
- AI Step-by-Step Explanations (100/day)
- Spaced Repetition Recall (FSRS)
- AI Tutor
- Immersive Text Questions
- Audio Lessons — Hindi & English
- Mock Tests & Previous Year Papers
- Summary & Mind Maps
- XP, Levels, Leaderboard & Badges
- Generate New Classrooms
- Voice AI Teacher (AgriDots Live)
- AI Revision Assistant
- Knowledge Gap Analysis
- Interactive Revision (LangGraph)
🔒 Secure via Razorpay · Cancel anytime · No hidden fees
RBI Circulars October 2025
This lesson covers the key regulatory updates and circulars issued by the Reserve Bank of India in October 2025.
1. Merchanting Trade Transactions (MTT) – Review of time period for outlay of foreign exchange
What is a Merchanting Trade Transaction (MTT)?
Think of this as "Middleman Trading." An Indian trader buys goods from one foreign country and sells them to another foreign country, without the goods ever entering India.
Example:
- Indian Company (You): XY Limited (in India).
- Supplier: A seller in Canada.
- Buyer: A customer in the USA.
Process:
- You buy Laptops from Canada (Import Leg).
- You tell the Canadian seller: "Don't send them to India. Ship them directly to my customer in the USA."
- You sell the Laptops to the USA (Export Leg).
Key Exam Definition: In MTT, the goods do not enter the Domestic Tariff Area (DTA) of India.
Example: The Electronics Flip
Imagine you are a trader in India. You find a buyer in Germany who wants ₹100,000 worth of laptops from a supplier in China.
Scenario A: You pay the supplier first (The Outlay begins)
- January 1st: You pay the China supplier ₹80,000.
- Overall Cycle: Starts today (Day 1 of 9 months).
- Outlay Period: Starts today (Day 1 of 6 months) because your money is now "out."
- March 1st: The China supplier ships the goods directly to Germany.
- May 1st: The German buyer pays you ₹100,000.
- Outlay Period STOPS: You were "out of pocket" for exactly 4 months. You are safe (under the 6-month limit).
- Overall Cycle STOPS: The deal is fully settled in 4 months. You are safe (under the 9-month limit).
Scenario B: You get an advance first (The Outlay is delayed)
-
January 1st: The German buyer sends you a ₹20,000 advance.
- Overall Cycle: Starts today (Day 1 of 9 months).
- Outlay Period: Does NOT start. You haven't spent any of your own/the bank's forex yet; you actually gained money!
-
April 1st: You pay the China supplier ₹80,000.
- Outlay Period: Starts today (Day 1 of 6 months).
-
September 1st: The German buyer pays you the remaining ₹80,000.
- Outlay Period STOPS: You were "out of pocket" for 5 months. You are safe.
- Overall Cycle STOPS: The deal took 8 months total (Jan to Sept). You are safe.
The Overall Cycle is the time allowed for the "story" of the trade to happen. The Outlay is the time allowed for your bank account to stay in the "negative".
The Big Update (The Numbers)
The RBI has relaxed the rules regarding how long your money can be "stuck" abroad.
Understanding "Outlay of Foreign Exchange": Often in business, you (the Indian trader) have to pay the Canadian supplier first (Money goes out), and your USA customer pays you later (Money comes in).
- The time gap between Paying the Supplier and Receiving money from the Buyer is called the Outlay of Foreign Exchange.
The Change:
| Feature | Old Rule | New Rule (2025) |
|---|---|---|
| Max time for Forex Outlay | 4 Months | 6 Months |
| Total time to complete MTT | 9 Months | 9 Months (Unchanged) |
Why this matters? It gives Indian traders 2 extra months to collect money from their buyers after paying their suppliers, offering them better cash flow management.
Important Timelines (Memorize This!)
For the exam, remember these two separate timelines:
- Overall Cycle: The entire deal (from the first payment/receipt to the last payment/receipt) must be completed within 9 Months.
- Forex Outlay: If you pay the supplier first, you must receive payment from the buyer within 6 Months (Previously 4).
Technical Definition of Dates:
- Commencement of MTT: The date of shipment / export leg receipt or import leg payment, whichever is EARLIER.
- Completion of MTT: The date of shipment / export leg receipt or import leg payment, whichever is LATER.
Summary Cheat Sheet
- Subject: Merchanting Trade Transactions (MTT).
- Goods Movement: Foreign Country A -> Foreign Country B (Skips India).
- New Outlay Limit: 6 Months.
- Overall Completion Limit: 9 Months.
- Legal Basis: Sections 10(4) and 11(1) of FEMA, 1999.
2. Export Data Processing and Monitoring System (EDPMS) & Import Data Processing and Monitoring System (IDPMS) - reconciliation of export /import entries - Review of Guidelines
This circular is a massive relief for small exporters and importers.
What are EDPMS and IDPMS? (The Basics)
Before understanding the change, you must know what these systems do. They are RBI's digital eyes to track foreign currency.
-
EDPMS (Export Data Processing and Monitoring System):
- Launched: 2014.
- Purpose: Tracks Exports.
- Logic: If goods leave India, money must come in. EDPMS ensures exporters bring the money back.
- Flow: Customs uploads the Shipping Bill -> Bank uploads the Payment Receipt (FIRC) -> System matches them -> Entry Closed.
-
IDPMS (Import Data Processing and Monitoring System):
- Launched: October 2016.
- Purpose: Tracks Imports.
- Logic: If money leaves India, goods must come in. IDPMS prevents people from sending money abroad illegally without actually importing anything (over-invoicing).
- Flow: Customs uploads Bill of Entry -> Bank uploads Payment Message (ORM) -> System matches them -> Entry Closed.
The New Guidelines (The "₹10 Lakh" Rule)
The RBI realized that tracking and reconciling very small entries (mismatches) creates too much paperwork. To fix this, they have introduced a Simplified Closure Procedure.
A. The Threshold Limit (Memorize This!)
- Limit: ₹10 Lakh per entry/bill.
- The Rule: For any Export or Import bill up to ₹10 Lakh, banks can now close the entry based solely on a Simple Declaration from the customer.
- What this means: The bank does not need to chase the customer for heavy proof documents for these small amounts.
B. Reduction in Value
- Sometimes, an exporter sends goods worth ₹5 Lakh, but the buyer only pays ₹4.5 Lakh (maybe due to damaged goods).
- Old Way: Huge paperwork to justify the loss.
- New Way (for < ₹10L): The bank can accept the lower value based on just a declaration from the exporter/importer.
C. Bulk Reporting (Quarterly)
- Instead of submitting a declaration for every single small bill, exporters/importers can submit a Consolidated Declaration once every Quarter.
Bank Charges & Penalties (Exam Fodder)
- Service Charges: Since the work for banks has reduced (just a declaration needed), RBI has advised banks to review (lower) their service charges for these small transactions.
- No Penal Charges: Banks CANNOT levy any penal charges (fines) on customers for delays in adhering to these regulatory guidelines.
Summary Cheat Sheet for Exams
| Feature | Details |
|---|---|
| System | EDPMS (Exports) & IDPMS (Imports) |
| New Limit for Simplified Closure | ₹10 Lakh per bill |
| Basis of Closure | Self-Declaration by Exporter/Importer |
| Frequency of Declaration | Can be Quarterly (Consolidated) |
| Penal Charges | Prohibited for regulatory delays |
| Applicability | AD Category-I Banks |
| Act | FEMA, 1999 |
3. Investment in Corporate Debt Securities by Persons Resident Outside India through Special Rupee Vostro account
This circular is an extension of the previous topic we discussed regarding Special Rupee Vostro Accounts (SRVAs).
The Big Change (What is New?)
Previously: Foreign entities holding a Special Rupee Vostro Account (SRVA) could use their surplus Rupees to invest only in Government Securities (G-Secs) and Treasury Bills.
Now (The Update): The RBI has expanded the list. Now, these SRVA holders can also invest their surplus balance in Corporate Debt Securities issued by Indian companies.
- Eligible Instruments:
- Non-convertible Debentures (NCDs).
- Bonds issued by Indian companies.
- Commercial Papers (CPs) issued by Indian companies.
Note: They cannot invest in Municipal Bonds under this specific corporate debt permission.
Understanding the Concepts (Static Banking)
A. What is an SRVA?
- Vostro means "Yours". It is an account that a foreign bank holds with an Indian bank in Indian Rupees (INR).
- It is used to settle trade payments in Rupees instead of Dollars.
B. What are Corporate Debt Securities?
- These are loans taken by private companies (not the government) from the market.
- Includes items like NCDs, Bonds, and Commercial Papers.
Key Exam Rules & Limits (Memorize These!)
The circular lays down specific conditions for these investments.
A. Investment Limit (The General Route)
- These investments will be counted under the General Route limit for Foreign Portfolio Investors (FPIs).
- Currently, the limit for Corporate Debt under the General Route is 15% of the outstanding stock of corporate bonds.
B. The Exemptions (Very High Yield) While normal FPI rules apply, SRVA investors get two specific exemptions:
- No Minimum Residual Maturity: They can buy bonds of any maturity (even very short-term ones).
- No Issue-wise Limit: There is no cap on how much of a single company's bond issue they can buy.
C. Money Flow
- Purchase: Must be paid from the surplus balance in the SRVA.
- Sale/Maturity: All proceeds (money earned) must be credited back to the same SRVA.
D. Operational Requirement
- Banks (AD Category-I) must facilitate opening a separate Demat Account for SRVA holders to hold these corporate bonds.
Summary Cheat Sheet for Exams
- Who can invest? Persons Resident Outside India (SRVA holders).
- New Permitted Assets: Corporate Bonds, NCDs, Commercial Papers.
- Investment Route: General Route for Corporate Debt.
- Exemptions: Minimum Residual Maturity & Issue-wise limits do not apply.
- Reporting: Transactions must be reported to Depositories (registered with SEBI).
4. International Trade Settlement in Indian Rupees (INR)
This is a consequential circular. It essentially tells the banks (AD Category-I) to start implementing the big policy change we just discussed in the previous topic.
The Connection (Connecting the Dots)
- 2022 Circular: When RBI first allowed International Trade Settlement in INR (July 2022), they said the surplus money in Special Rupee Vostro Accounts (SRVA) could be invested only in Government Securities (G-Secs) and T-Bills.
- 2025 Update (This Circular): Now that the RBI has officially changed the rules (as seen in the previous Master Direction update), this circular gives the Green Signal to banks to allow these investments.
The New Permitted List (Exam Question)
Banks can now permit SRVA holders to invest their surplus balance in:
- Non-Convertible Debentures (NCDs)
- Bonds issued by Indian companies.
- Commercial Papers (CPs).
Key Takeaway for Exams
If a question asks: "Surplus balances in Special Rupee Vostro Accounts can be invested in which of the following?"
- Old Answer: G-Secs & T-Bills only.
- New Answer: G-Secs, T-Bills, AND Corporate Debt (NCDs, Bonds, CPs).
Summary: This circular effectively says, "Attention Banks: The rules have changed. Please start allowing your SRVA clients to buy corporate bonds immediately."
5. Reserve Bank - Integrated Ombudsman Scheme, 2021 (RB-IOS, 2021)
The Reserve Bank - Integrated Ombudsman Scheme (RB-IOS) is the primary mechanism for customer grievance redressal in India.
The New Update (Current Affairs)
What Changed? Previously, certain Co-operative banks were not fully covered under this central scheme.
- The Update: The RBI has directed that State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs) will now be treated as "Regulated Entities" under the Ombudsman Scheme.
- Effective Date: November 1, 2025.
Why is this important? It means customers of these rural/co-operative banks can now complain to the RBI Ombudsman if the bank fails to resolve their issues, ensuring better consumer protection.
What is RB-IOS, 2021? (Static Banking)
The Concept: "One Nation, One Ombudsman" Before 2021, there were three separate ombudsman schemes (one for Banks, one for NBFCs, and one for Digital Transactions).
- Integration: On November 12, 2021, RBI merged all three into one single scheme: RB-IOS, 2021.
- Structure: There are currently 22 Offices of the RBI Ombudsman (ORBIOs) across India.
- Tenure: The Ombudsman is appointed for a tenure of 3 Years.
- Objective: To provide a cost-free, speedy resolution to customer complaints regarding "Deficiency in Service".
- Jurisdiction Neutral: You can complain from anywhere. It doesn't matter where your bank branch is located.
Who is Covered? (Regulated Entities)
For exams, you must memorize the eligibility criteria for different entities.
| Entity Type | Condition for Coverage |
|---|---|
| Commercial Banks | All covered (Public, Private, Foreign, SFBs, Payment Banks, RRBs). |
| Co-operative Banks | • Scheduled Primary (Urban) Co-op Banks: All. • Non-Scheduled Primary (Urban) Co-op Banks: Only if Deposits ≥ ₹50 Crore. • [NEW] State & Central Co-op Banks (from Nov 1, 2025). |
| NBFCs | Assets ≥ ₹100 Crore (Excluding Housing Finance Companies). |
| Others | • Credit Information Companies (CIBIL, etc.). • System Participants (UPI apps, Wallets like PhonePe/GPay). |
How to File a Complaint? (The Process)
You cannot walk straight to the Ombudsman. You must follow a sequence.
- Step 1: Complain to the Bank/Entity first.
- Step 2: Wait for 30 Days.
- If they reject your complaint, OR
- If they don't reply within 30 days, OR
- If you are not satisfied with the reply...
- Step 3: You can file a complaint with the RBI Ombudsman.
Where to File?
- Online: On the CMS Portal (Complaint Management System).
- Physical Letter: To the CRPC (Centralised Receipt and Processing Centre) located in Chandigarh.
Time Limit: You must file the complaint within 1 Year of receiving the bank's reply (or 1 year + 30 days if they never replied).
Compensation Limits
If the Ombudsman decides in your favor, how much money can you get?
- Award Limit: The Ombudsman can order the bank to pay you up to ₹20 Lakh for the actual loss suffered.
- Mental Agony: Additional compensation up to ₹1 Lakh for harassment, mental anguish, and loss of time.
- Total Dispute Amount: There is NO limit on the disputed amount you can complain about (e.g., you can complain about a ₹1 Crore fraud, but the Ombudsman can only award max ₹20 Lakh).
Important Terms
- Deficiency in Service: Any shortcoming or inadequacy in the financial service (e.g., hidden charges, failed transaction not reversed).
- Non-Maintainable: Complaints that the Ombudsman will reject. Examples:
- Complaints about "Commercial Decisions" (e.g., "Why did the bank reject my loan?").
- Disputes between employee and employer.
- Cases already pending in Court.
- Appellate Authority: If you (or the bank) are unhappy with the Ombudsman's decision, you can file an appeal within 30 days to the Appellate Authority in RBI.
Summary Cheat Sheet for Revision
- Scheme Launch Date: Nov 12, 2021.
- New Update Date: Nov 01, 2025 (StCBs/CCBs added).
- CRPC Location: Chandigarh.
- Max Compensation: ₹20 Lakh.
- Max Compensation (Mental): ₹1 Lakh.
- Wait Period before filing: 30 Days.
- NBFC Asset Limit: ₹100 Crore.
- Non-Scheduled UCB Deposit Limit: ₹50 Crore.
6. Foreign Exchange Management (Borrowing and Lending) (Amendment) Regulations, 2025
The Core Update
Indian Banks can now lend Indian Rupees (INR) to our neighbors—Bhutan, Nepal, and Sri Lanka—to help them trade with us.
The Details (The "Who, What, Where"):
- Lender: Authorised Dealer (AD) Banks in India (like SBI, HDFC, etc.).
- Borrower:
- A person resident in Bhutan, Nepal, or Sri Lanka.
- This includes banks located in these three countries.
- Currency: The loan must be in Indian Rupees (INR).
- Purpose: Strictly for Cross-Border Trade Transactions.
Why? These countries often face a shortage of Dollars or other foreign currencies. By allowing them to borrow in Rupees to pay for Indian goods, trade becomes smoother and doesn't stop due to a lack of Dollars.
Key Exam Points (Memorize These!)
- Permitted Countries: Bhutan, Nepal, Sri Lanka (Memorize this trio. Options might confuse you with Bangladesh or Maldives).
- Permitted Currency: INR only (Not USD or local currency).
- Permitted Purpose: Trade Transactions (Not for buying property or personal loans).
- Effective Date: October 6, 2025.
Legal Basis
- Regulation Amends: Foreign Exchange Management (Borrowing and Lending) Regulations, 2018.
- New Clause Added: Regulation 7, Sub-regulation A, Clause (iv).
Summary Cheat Sheet for Revision
- Subject: INR Lending to Neighbors.
- Countries: Nepal, Bhutan, Sri Lanka.
- Purpose: Cross-border Trade.
- Act: FEMA, 1999.
7. Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) (Seventh Amendment) Regulations, 2025
This amendment to the FEMA regulations introduces a significant change regarding where Indian exporters can hold their Foreign Currency Accounts (FCA), specifically benefiting those operating through the International Financial Services Centre (IFSC) like GIFT City.
The Core Update: Where Can Exporters Hold Accounts?
- Old Rule: Indian exporters could open Foreign Currency Accounts (FCA) with a bank "outside India" to hold their export earnings temporarily.
- New Rule (The Change): The RBI has clarified and expanded the definition of "outside India" for this specific purpose.
- Explanation Added: Accounts permitted to be opened "outside India/abroad" can also be opened in an International Financial Services Centre (IFSC).
- Why? An IFSC (like GIFT City in Gujarat) is physically in India but is treated as a "foreign territory" for financial regulations. This amendment formally allows exporters to use banks in IFSC for their foreign currency needs.
Timelines for Repatriation (Crucial for Exams)
The regulation sets strict timelines on how long an exporter can keep their earnings in these foreign accounts before they must bring the money back to India (repatriate).
The Timelines (Memorize This Difference):
| Location of Bank Account | Max Time to Hold Funds |
|---|---|
| Banks in IFSC | 3 Months from the date of receipt. |
| All Other Jurisdictions (Abroad) | Next Month (i.e., by the end of the next month). |
Key Takeaway: If you open an account in IFSC (GIFT City), you get a longer window (3 Months) to utilize or repatriate your funds compared to a regular account abroad (Next Month).
Purpose of the Account
- Inflow: Realisation of full export value and advance remittances received for exports.
- Outflow (Utilization): Can be used to pay for Imports into India.
- Condition: If not used for imports, the money must be repatriated to India within the timelines mentioned above.
Summary Cheat Sheet for Revision
- Subject: Foreign Currency Accounts for Exporters.
- New Permitted Location: IFSC (International Financial Services Centre).
- Time Limit (IFSC): 3 Months.
- Time Limit (Other Abroad): Next Month.
- Act: FEMA, 1999 (Foreign Currency Accounts Regulations, 2015).
8. Reserve Bank of India (Nomination Facility in Deposit Accounts, Safe Deposit Lockers and Articles kept in Safe Custody with the Banks) Directions, 2025
This circular is a critical update regarding Nomination Facilities in banks, following the Banking Laws (Amendment) Act, 2025. This is a "must-know" topic for the Legal & Regulatory Aspects of Banking section.
The Context (Why Now?)
The Government has updated the banking laws (Banking Laws Amendment Act, 2025). To align with these new laws, the RBI has issued these new directions to streamline how nominations work for Deposits, Lockers, and Safe Custody articles.
- Effective Date: These rules come into force on November 1, 2025.
- Applicability: Applies to All Banks (Commercial, Co-operative, RRBs, SBI, etc.).
Key Rules for Nomination (Exam Fodder)
A. Mandatory Offer Banks must offer the nomination facility to all customers opening deposit accounts.
- Proprietorship Accounts: If an individual opens an account for their proprietorship business, it is treated as an "individual account," and nomination facility must be offered.
B. Can a Customer Refuse Nomination? Yes, but there is a strict process:
- Explain Benefits: The bank must first explain the advantages (easy settlement after death) to the customer.
- Written Declaration: If the customer still says "No," the bank must ask for a written declaration confirming they don't want a nominee.
- Refusal to Write: If the customer refuses to even give a written declaration, the bank must record this refusal in their system.
- No Denial of Service: A bank cannot refuse to open an account just because the customer didn't add a nominee.
Simultaneous Nomination & Death
The new rules address "Simultaneous Nomination" (having multiple nominees).
- Scenario: A customer appoints multiple nominees (say, Nominee A and Nominee B).
- The Issue: Nominee A dies before the account holder.
- The Rule: The nomination for Nominee A becomes ineffective. However, Nominee B's claim remains valid.
- The share meant for Nominee A will be settled according to the rules for "Accounts without Nominee" (i.e., paid to legal heirs), while Nominee B gets their share directly.
Operational Timelines (Memorize This!)
This is the most likely objective question from this circular. The "3 Working Days" Rule:
- Acknowledgement: When a customer submits a nomination form (registration, cancellation, or change), the bank must give an acknowledgement within 3 working days.
- Rejection: If the form has errors and is rejected, the bank must inform the customer in writing with reasons within 3 working days.
Passbook & Statement Rules
To ensure customers and their families know a nominee exists:
- The Legend: The Passbook/Statement/Term Deposit Receipt (TDR) must carry the label "Nomination Registered".
- The Name: The bank must also print the Name of the Nominee(s) on these documents.
Summary Cheat Sheet for Revision
| Feature | Rule |
|---|---|
| Effective Date | November 1, 2025 |
| Refusal of Nomination | Allowed (Written declaration needed) |
| Account Opening | Cannot be denied for lack of nomination |
| Acknowledgement Time | 3 Working Days |
| Rejection Intimation | 3 Working Days |
| Passbook Disclosure | Must show "Nomination Registered" + Nominee Name |
Lesson Doubts
Ask questions, get expert answers