Indian banks are asking the Reserve Bank of India for permission to use new trade regulations to resolve nearly ₹1 lakh crore in decade-old cross-border transaction mismatches. This initiative aims to clear legacy backlogs before new rules start on October 1, 2026, helping prevent exporters from being placed on restrictive regulatory caution lists.
Indian lenders are in talks with the Reserve Bank of India (RBI) to address a significant backlog of unsettled cross-border trade transactions. The total value of these outstanding entries is estimated at approximately ₹1 lakh crore, with many of these cases dating back over the last decade. Banks are now requesting a formal mandate to apply upcoming trade regulations, which are scheduled to take effect on October 1, 2026, to resolve these historical records.
The current process for settling these older transactions is complex and time-consuming. Under existing rules, banks often need to seek specific approval from the central bank for each case. This manual process has led to a build-up of unreconciled entries, including cases where documentation is missing, the original companies have since closed, or where cargo was never delivered by certain operators.
For exporters, the stakes are high. If these trade files remain unresolved, businesses risk being placed on an RBI-monitored caution list. Once an exporter is added to this list, their future ability to trade is severely restricted, often forcing them to rely only on advance payments or letters of credit. Banks are arguing that allowing them to use the discretionary powers available under the new regulatory framework would provide a cleaner way to settle these legacy files without the current administrative bottlenecks.
The upcoming regulatory framework is designed to be more flexible, allowing for resolution through client declarations rather than requiring case-by-case central bank approval. Banks are hesitant to apply these new, flexible standards to historical data without explicit authorization from the regulator, fearing potential regulatory scrutiny for using new powers on old data.
RBI Deputy Governor Rohit Jain has scheduled a meeting with bank chief executives to discuss the proposal. The central focus of the discussion will be determining whether banks can be granted the authority to independently write off smaller entries or validate larger payments based on provided declarations. If the RBI gives the go-ahead, it could help the banking system clear these long-standing trade mismatches and streamline the trade finance process before the new regime begins.
For the banking sector, the resolution of these mismatches would primarily reduce administrative pressure and operational complexity. Investors may monitor the outcome of the meeting between the RBI and bank leadership, as the decision will clarify how legacy trade documentation will be handled and whether the risk of 'caution-listing' for active exporters will be mitigated.