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Merchanting Trade Transactions

Current · Source: Reserve Bank of India · RBI/2025-26/88 · issued 01 Oct 2025 · ~1 min read
Quick answerRBI increases foreign exchange outlay time for merchanting trade to 6 months.
The rule, in the simplest words
How it plays out — a real example

A forex & trade-finance officer in Mumbai, Priya, processes a merchanting trade for a client who imports electronics from China and exports them to Dubai. Under the old rule, Priya had to ensure the client paid the Chinese supplier within 4 months; now she can allow up to 6 months for that foreign exchange outlay, giving the client more breathing room to manage cash flow while still completing the entire deal within 9 months.

What changed

The Reserve Bank of India has increased the time period for outlay of foreign exchange in merchanting trade transactions from 4 to 6 months. The overall period for completing the transaction remains 9 months. The change aims to help merchanting traders manage their transactions more efficiently.

What it means for you

This change will provide more flexibility to merchanting traders in managing their foreign exchange outlays. It may also lead to increased trade volumes and better cash flow management for these traders. Banks will need to update their systems and processes to reflect the new time period.

What you must do

Who it affects

Authorised Dealer Category-I Banks, Merchanting traders, Exporters and importers

❓ Common questions

What is the new time period for outlay of foreign exchange?

6 months

Has the overall period for completing the transaction changed?

No, it remains 9 months

📜 Read the original circular — full text as issued by RBI
RBI/2025-26/88 A.P. (DIR Series) Circular No. 11 October 01, 2025 All Authorised Dealer Category-I Banks Madam / Sir, Merchanting Trade Transactions (MTT) – Review of time period for outlay of foreign exchange Attention of Authorised Dealer Category – I banks (AD banks) is invited to Para 2 (vi) of A.P. (DIR Series) Circular No.20 dated January 23, 2020 wherein it has been indicated that ‘The entire MTT shall be completed within an overall period of nine months and there shall not be any outlay of foreign exchange beyond four months. The commencement date of merchanting trade shall be the date of shipment / export leg receipt or import leg payment, whichever is first. The completion date shall be the date of shipment / export leg receipt or import leg payment, whichever is the last’. 2. On a review and in order to facilitate merchanting traders to manage their MTT efficiently, it has been decided to increase the time period for outlay of foreign exchange from four to six months. All the other directions indicated in the Circular referred above shall remain unchanged. 3. The above instruction is applicable with immediate effect. AD banks may bring the contents of this circular to the notice of their constituents and customers concerned. 4. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (N. Senthil Kumar) Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2025-26/88 · issued 01 Oct 2025. The plain-English explanation above is BankPulse’s own independent summary.
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Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (Authorised Dealer Category-I Banks, Merchanting traders, Exporters and importers), your first concrete step on “Merchanting Trade Transactions” is: “Update internal policies and procedures” (RBI issued this 01 Oct 2025).

  1. Circular: RBI/2025-26/88 -- Merchanting Trade Transactions
  2. Issued: 01 Oct 2025
  3. Action required: Update internal policies and procedures
  4. Action required: Inform customers about the change
  5. Action required: Review and adjust foreign exchange outlay limits
  6. Owner: ____________ Target date: ____________
  7. Board/committee approval needed? Y / N
  8. 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=12907&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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