FEMA Compliance Alert: Why Indian Banks Are Blocking Export & Import Remittances Without Clear Purpose Codes

If you’ve recently tried to remit funds abroad, you may have noticed a new hurdle: Indian banks are now scrutinizing the purpose code you use for every overseas transaction. Gone are the days when “S1099 – Other Services Not Included Elsewhere” was a convenient catch-all code. Today, banks are routinely rejecting remittances labelled under this code, asking for specific transaction details, and sometimes blocking payments outright.

What’s Changed?

Following recent Reserve Bank of India (RBI) directives, banks have moved to restrict the use of general or miscellaneous purpose codes for outward remittances. The goal? To curb misuse, prevent money laundering, and ensure transparency about the true nature of outward fund flows from India.

Until now, many companies and individuals have used S1099 (“Other Services Not Included Elsewhere”) whenever their remittance didn’t clearly fit into RBI’s defined codes. This practice is now under intense scrutiny. Banks—whether public, private, or multinational—are refusing most S1099-coded remittances. Instead, they’re demanding a precise description of the underlying transaction and an accurate purpose code, as mandated in the A2 Form for non-import remittances.

Why Does This Matter?

• Operational Disruption: Many legitimate payments—such as professional memberships, foreign subscriptions, or reimbursement for insurance—have no clear RBI code. This puts businesses in a bind, leading to delayed or blocked payments.
• Compliance Pressure: Reporting an incorrect code can result in compliance risks and potential tax complications (such as unintended TDS applicability).
• Unintended Consequences: With “S1099” being discouraged, businesses are forced to squeeze transactions into codes that may not accurately reflect their nature, leading to inaccurate reporting.

What Should You Do?

• Match Your Transaction to the RBI Purpose Code List: Carefully check if your transaction fits an existing code. If not, discuss with your bank’s compliance team before initiating the remittance.
• Document Everything: Maintain records and correspondence with your bank, especially if a transaction is blocked or you are directed to use a specific code.
• Seek Approvals: For truly miscellaneous transactions, higher-level bank approvals may be technically possible, but are rarely granted. Proactive communication can help you prepare alternative compliance steps.

Our Ongoing Guidance

At International Trade Decoded, we have been highlighting these practical challenges for Indian exporters and compliance professionals—on YouTube and through our advisory practice. As RBI and FEMA norms evolve, staying informed and prepared is critical for smooth cross-border operations.

Don’t let regulatory changes catch you off guard.

• Stay tuned to our YouTube channel and blogs for actionable insights on FEMA, trade documentation, purpose coding, and real-world compliance.
• Reach out for curated training or tailored advisory if your team is facing remittance or export documentation roadblocks.

This is just one of many issues where regulatory nuance meets operational reality—exactly what we aim to decode for you, every week.

Don’t let your export or import payments get stuck due to FEMA compliance gaps!

Stay updated with real-world strategies for handling RBI purpose codes, cross-border remittances, and practical export/import operations.

Subscribe to International Trade Decoded (https://youtu.be/mam3VrlRNrI?si=kj-RghwseTSquDGs) for weekly guidance, or contact us for expert advisory and customized training on FEMA and international payments.