In order to enhance the cross border investment flexibility, the government has amended the Foreign Exchange Management (Non Debt Instruments) Rules, 2019, through the Foreign Exchange Management (Fourth Amendment) Rules, 2024.
The significant changes that have been notified are enumerated below:
Share Swaps for Secondary Transfers:
Permits
üswap of equity instruments of an Indian Company and/ or equity capital of a foreign entity against transaction involving transfer of equity instruments of an Indian Company between person resident in India (PRI) and a person resident outside India (PROI) or,
ü issue of equity instruments of an Indian Company to a person resident outside India.
Prior Government Approval for all Secondary Transfers
The transfer of equity instruments of an Indian company by a person resident outside India by way of sale or gift will now require a prior government approval in all cases
Government Approval for Foreign Portfolio Investment:
üThe Amendment Rules provide that aggregate foreign portfolio investment (FPI) up to the sectoral cap will not require government approval or compliance with sectoral conditions.
üProvided that such investment does not result in transfer of ownership or control.
Sectoral Cap for White Label ATMs Operations (WLAO)
100% FDI under automatic route is now permitted for white label ATM operations inter alia subject to specific criteria and guidelines issued by the Reserve Bank of India in this regard.
Downstream investment on non-repatriable basis:
üEarlier, investments by a non-resident Indian (NRI) on a non-repatriable basis, was not considered for calculation of indirect foreign investment.
üNow this provision is extended to include investment held by an OCI, a company, a trust or a partnership firm incorporated outside India and owned and controlled by an NRI or an OCI, on a non-repatriation basis in compliance with Schedule IV of these rules.
These modifications are significant advancements in easing foreign investment and streamlining regulations to facilitate ease of doing business. Focusing on making India a more attractive destination for foreign investors and simplifying regulatory processes for global business expansion.