Permitted Methods of Import Payment

The trigger for this topic is a question that a reader asked:

Since Foreign Trade Policy allows imports in INR (Indian Rupees) also, what are the regulations related to buyer’s credit in respect of an import invoice which is in INR ?

Above question is more of an academic question as INR denominated import transaction are very limited but it will help in throwing light on concept of permitted methods of import payment.


RBI Circular on Import of Goods and Services talks about permitted methods of payment of import, which is further defined in Notification No.FEMA14/2000-RB dated 3rd May 2000. They are:

Group Permitted methods
(i) All countries other than those listed under (ii) below (a) Payment in rupees to the account of a resident of any country in this Group
(b) Payment in any permitted currency*
(ii) Member countries in the Asian Clearing Union (expect Nepal) (a) Payment for all eligible current transactions by debit to the ACU (Asian Clearing Union) dollar account in India of a bank of the participating country in which is resident or by credit to the ACU dollar account of the authorised dealer maintained with the correspondent bank in the other participating country.
(b) Payment in any permitted currency in other cases

* The expression ‘permitted currency’ is used in the Manual to indicate a foreign currency which is freely convertible i.e. a currency which is permitted by the rules and regulations of the country concerned to be converted into major reserve currencies like U.S. Dollar, Pound Sterling and for which a fairly active market exists for dealings against the major currencies.

Answer to Question

RBI has allowed making import payment in INR but Buyers Credit as a concept is to raise funds from overseas market in the currency of payment resulting in interest arbitrage and hence cost saving.


  • Transaction Value of $ 100000: Approx 10% (including overseas bank interest cost, lou charges, forward booking and arrangement fee)
  • Transaction Value of INR 6200000 (Approx INR equivalent) : INR Cash Credit Interest: Approx 13.50%
  • Resulting cost saving of 3.5% (approx)

If the import is in INR, funding arranged in INR will be at same cost and thus no cost saving. One more question which arise is, whether buyers credit in cross currency  is allowed for such transaction. According to me it is a gray area.


  1. Notification No.FEMA14/2000-RB dated 3rd May 2000
  2. Exchange Control Manual: Permitted Currencies and Method of payment
  3. Buyers Credit Cost Calculation Sheet

2 thoughts on “Permitted Methods of Import Payment”

  1. Please inform me about Credit linked Capital Subsidy Scheme including its application form and annexure and appendix

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