Govt. of India notifies ‘Overseas Investment’ Rules/ Regulations/ Directions 2022

Ministry of Finance (MoF), Govt. of India and RBI have notified the Foreign Exchange Management Overseas Investment (OI) Rules/ Regulations/ Directions 2022, as a step towards the Ease of Doing Business. In line with the amendment in the Foreign Exchange Management Act (FEMA) 2015, the Indian Govt. (GOI) has framed/ consolidated the Outward Investments Rules/ Regulations, as part of a comprehensive exercise to simplify these Rules/ Regulations, in consultation with the Reserve Bank of India (RBI).

As part of the Govt. initiatives relating to ‘liberalization of economy’ and ‘ease of doing business’, RBI has been simplifying/ rationalizing the Procedures, Rules and Regulations under FEMA for last few decades. In yet another initiative in this direction, the RBI and GOI have taken a significant step with operationalization of the new and simplified Overseas Investment (OI) regime/ framework, which is meant to reduce the compliance burdens/ costs, as the need for seeking specific approvals, etc., has been reduced substantially.

Overseas Investments Rules/ Regulations/ Directions (the framework) have been simplified for ‘ease of doing business’ and to provide global opportunities for growth/ competitiveness of the Indian entrepreneurs/ entities (persons resident in India), to boost their global business/ brand value, which eventually will contribute to India’s economic growth also, by way of increase in foreign trade, employment, investment, etc.

Govt. of India notifies Foreign Exchange Management 'Overseas Investment' Rules/ Regulations 2022

The Foreign Exchange Management (Overseas Investment) Rules/ Regulations 2022 notified by the Govt. will subsume/ supersede the extant regulations applicable for Indian residents, like Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 and Foreign Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015.

In the increasingly integrated global market, there is a need of Indian Corporates/ entities/ Individuals to be a part of the global value chain, in view of evolving business needs in India, therefore the revised regulatory framework for overseas investments by Indian entities provides for simplification and alignment with current business and economic dynamics.

With these Rules/ Regulations/ Directions on Overseas Investments, there will be better clarity on Overseas Direct Investment (ODI) and Overseas Portfolio Investment (OPI). Also, various overseas investment (OI) related transactions that were earlier under the ‘approval route’ have now been moved to the ‘automatic route’, which will significantly contribute to enhance the “Ease of Doing Business” initiative of the Govt. of India.

Significant changes in new Overseas Investments Regime/ Framework

Some of the significant changes brought about through the new Overseas Investments (OI) Rules and Regulations are summarised below:

(i) enhanced clarity with respect to various definitions;

(ii) introduction of the concept of “strategic sector”;

(iii) dispensing with the requirement of approval for:

a) deferred payment of consideration;

b) investment/ disinvestment by persons resident in India under investigation by any investigative agency/ regulatory body;

c) issuance of corporate guarantees to or on behalf of second or subsequent level step down subsidiary (SDS);

d) write-off on account of disinvestment;

(iv) introduction of “Late Submission Fee (LSF)” for reporting delays.

MoF, GOI Notification dt. 22/08/2022: Foreign Exchange Management (Overseas Investment) Rules, 2022

The Foreign Exchange Management (Overseas Investment) Rules 2022 shall be administered by the Reserve Bank of India (RBI), which will issue requisite directions, circulars, instructions and clarifications, from time to time, as may be necessary for the effective implementation of the provisions of these rules.

These Rules provides for the prescribed manner and terms & conditions for Overseas Direct Investment (ODI) by Indian entity (Schedule I), Overseas Portfolio Investment (OPI) by an Indian entity (Schedule II), Overseas Investment (OI) by resident individual (Schedule III), Overseas Investment (OI) by person resident in India other than Indian entity and resident Individual (Schedule IV) and Overseas Investment (OI) in IFSC by person resident in India (Schedule V).

MoF, GOI Notification dt. 22/08/2022: Foreign Exchange Management (Overseas Investment) Regulations, 2022

RBI has framed these Regulations under FEMA to prescribe the mode of payment, deferred payment of consideration, reporting, realisation, and other requirements for any investment outside India by a person resident in India.

RBI Notification dt. 22/08/2022: Foreign Exchange Management (Overseas Investment) Directions, 2022

RBI has notified the Foreign Exchange Management (Overseas Investment) Directions, 2022, which are required to be read in conjunction with the provisions contained in the Foreign Exchange Management (Overseas Investment) Rules, 2022 and the Foreign Exchange Management (Overseas Investment) Regulations, 2022. RBI has notified these directions with detailed/ updated operational instructions and reporting/ approval requirements, applicable for Overseas Investments, superseding all earlier instructions in this regard, i.e. Master Directions on Direct Investment by Residents in Joint Venture (‘JV’), Wholly Owned Subsidiary (‘WOS’) abroad, etc.

The directions contained in this Notification have been issued u/s 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 and are without prejudice to permissions/ approvals, if any, required under any other law.

One Response

  1. Gautam Verma

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