FEMA (Borrowing and Lending) Regulations Amended: AD Banks Can Lend INR to Bhutan, Nepal, Sri Lanka

FEMA (Borrowing and Lending) Regulations Amended: AD Banks Can Lend INR to Bhutan, Nepal, Sri Lanka

The Reserve Bank of India (Foreign Exchange Department) has issued a notification dated October 6, 2025 regarding amendments to the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018.

The Foreign Exchange Management Act (FEMA), 1999, is India’s primary law that regulates foreign exchange transactions to promote external trade and payments and to ensure the orderly development of the foreign exchange market. It replaced the stricter Foreign Exchange Regulation Act (FERA) and shifted the focus from control to management, empowering the Reserve Bank of India (RBI) to issue regulations and oversee foreign exchange matters.

In powers given by Section 6 (2) and Section 47 of the Foreign Exchange Management Act, 1922 (42). The Reserve Bank of India makes the following amendments:

1. Short Title and Commencement

(1) These regulations will be known as the Foreign Exchange Management (Borrowing and Lending) (Amendment) Regulations, 2025.

(2) They will be effective from the date of notification in the official gazette.

2. In the principal regulations, in regulation 7 sub-regulation A, after clause (iii), the following clause (iv) will be placed:

“An AD bank may lend in Indian Rupees to a person resident outside India, being a resident in Bhutan, Nepal or Sri Lanka, including a bank in these jurisdictions, for cross-border trade transactions.”