Module: General Practice
Q21: Consider the following statements regarding Advance Payments received against Exports under the amended FEMA regulations (Nov 2025):
Exporters are now allowed a period of 3 years (extended from 1 year) to complete the shipment of goods after receiving advance payment.
The rate of interest payable on such advance payment (if any) must not exceed LIBOR/SOFR + 100 basis points.
This extension applies only if the advance payment is routed through the ACU mechanism.
Which of the statements given above is/are correct?
The rate of interest payable on such advance payment (if any) must not exceed LIBOR/SOFR + 100 basis points.
This extension applies only if the advance payment is routed through the ACU mechanism.
Which of the statements given above is/are correct?
✅ Correct Answer: B
Statement 1 is Correct: The November 2025 amendment extended the time limit for making shipment against advance payments from 1 year to 3 years.
This gives exporters massive flexibility for long-gestation contracts.
Statement 2 is Correct: As per general Master Directions, if interest is payable on the advance, it should not exceed SOFR/LIBOR + 100 bps.
Statement 3 is Incorrect: The extension is applicable to all legitimate export transactions, not just those routed through the ACU mechanism.
This gives exporters massive flexibility for long-gestation contracts.
Statement 2 is Correct: As per general Master Directions, if interest is payable on the advance, it should not exceed SOFR/LIBOR + 100 bps.
Statement 3 is Incorrect: The extension is applicable to all legitimate export transactions, not just those routed through the ACU mechanism.