Current · Source: Reserve Bank of India · RBI/2009-10/465 · issued 13 May 2010 · ~2 min read
Quick answerRBI has removed the prior approval requirement from the Ministry of Commerce for royalty and lump-sum payments under technical collaboration agreements, effective May 5, 2010. AD Category-I banks can now process these remittances directly.
The rule, in the simplest words
Indian companies no longer need permission from the Ministry of Commerce to pay royalty (money for using a technology) or lump-sum (one-time big payment) under a technical collaboration (working together on technology) agreement.
Banks called AD Category-I (special banks allowed to handle foreign money) can now send these payments directly without asking the government first.
This rule started on May 5, 2010, and makes it faster and easier for companies to pay for foreign technology.
Banks must still check that all payments follow other laws and FEMA (foreign exchange rules).
How it plays out — a real example
A forex & trade-finance officer in Indore, Priya, receives a request from a local jewelry company to pay a $3 million lump-sum to a Swiss firm for a new gold-refining technology. Before May 2010, she would have told them to get Ministry of Commerce approval first. Now, she smiles and processes the remittance directly, ensuring the company signs a proper technical collaboration agreement and keeps all documents ready for FEMA compliance.
What changed
Item 8 of Schedule II to the Foreign Exchange Management (Current Account Transactions) Rules, 2000, which required prior approval from the Ministry of Commerce and Industry for royalty payments exceeding 5% on local sales and 8% on exports, and lump-sum payments over USD 2 million, has been omitted. Consequently, AD Category-I banks are now permitted to allow drawal of foreign exchange for such payments without seeking government approval.
What it means for you
This liberalisation simplifies the process for Indian companies entering into technical collaboration agreements, reducing bureaucratic hurdles and approval timelines. Banks can now process these remittances directly, enhancing operational efficiency and supporting ease of doing business. However, banks must ensure compliance with other applicable laws and FEMA provisions.
What you must do
Update internal procedures to process royalty and lump-sum remittances under technical collaboration agreements without requiring Ministry of Commerce approval.
Inform customers and constituents about the removal of prior approval requirement for these remittances.
Ensure all remittances are processed in compliance with FEMA and other applicable laws, maintaining proper documentation.
Monitor transactions to ensure they fall within the liberalised framework and report any anomalies as per regulatory guidelines.
Who it affects
AD Category-I banks, Indian companies entering into technical collaboration agreements, Customers seeking to remit royalty or lump-sum payments under such agreements
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What specific approvals have been removed under this circular?
The prior approval of the Ministry of Commerce and Industry is no longer required for remittances of royalty (previously capped at 5% on local sales and 8% on exports) and lump-sum payments (previously capped at USD 2 million) under technical collaboration agreements.
Do banks need to verify anything before processing these remittances?
Yes, banks must ensure compliance with FEMA and other applicable laws. While the specific approval from the Ministry of Commerce is removed, banks should still verify the underlying agreement and maintain proper documentation.
When did this change take effect?
The amendment was notified by the Government of India vide Notification No. G.S.R.382(E) dated May 5, 2010, and the circular was issued on May 13, 2010.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
📜 Read the original circular — full text as issued by RBI
RBI/2009-10/465
A. P. (DIR Series) Circular No. 52
May 13, 2010
To
All Category-I Authorised Dealer Banks
Madam / Sir,
Foreign Exchange Management Act (FEMA), 1999 -
Current Account Transactions – Liberalisation
Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Foreign Exchange Management (Current Account Transactions) Rules, 2000 notified vide Notification No.G.S.R.381(E) dated 3rd May 2000, as amended from time to time.
2. In terms of Rule 4 of the Foreign Exchange Management (Current Account Transactions) Rules 2000, prior approval of the Ministry of Commerce and Industry, Government of India, is required for drawing foreign exchange for remittances under technical collaboration agreements where payment of royalty exceeds 5% on local sales and 8% on exports and lump-sum payment exceeds USD 2 million [item 8 of Schedule II to the Foreign Exchange Management (Current Account Transactions) Rules, 2000]. The Government of India has reviewed the extant policy with regard to liberalization of foreign technology agreement and it was decided to omit item number 8 of Schedule II to the Foreign Exchange Management (Current Account Transaction) Rules, 2000, and the entry relating thereto.
3. Accordingly, AD Category-I banks may permit drawal of foreign exchange by persons for payment of royalty and lump-sum payment under technical collaboration agreements without the approval of Ministry of Commerce and Industry, Government of India.
4. The amendment to the Foreign Exchange Management (Current Account Transactions) Rules, 2000, in this regard has been notified by the Government of India vide Notification No.G.S.R.382 (E) dated May 5, 2010 (copy enclosed).
5. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
6. The directions contained in this Circular have been issued under Section 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Salim Gangadharan)
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/465 · issued 13 May 2010. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks, Indian companies entering into technical collaboration agreements, Customers seeking to remit royalty or lump-sum payments under such agreements), your first concrete step on “FEMA Liberalisation: Royalty & Lump-sum Remittances” is: “Update internal procedures to process royalty and lump-sum remittances under technical collaboration agreements without requiring Ministry of Commerce approval.” (RBI issued this 13 May 2010).
Action required: Update internal procedures to process royalty and lump-sum remittances under technical collaboration agreements without requiring Ministry of Commerce approval.
Action required: Inform customers and constituents about the removal of prior approval requirement for these remittances.
Action required: Ensure all remittances are processed in compliance with FEMA and other applicable laws, maintaining proper documentation.
Action required: Monitor transactions to ensure they fall within the liberalised framework and report any anomalies as per regulatory guidelines.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=5677&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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