Foreign Exchange
Management (Overseas Investment) Directions, 2022
[RBI/2022-2023/110
- A.P. (DIR Series) Circular No.12 dated August 22, 2022]
Overseas
investments by persons resident in India enhance the scale and scope of
business operations of Indian entrepreneurs by providing global opportunities
for growth. Such ventures through easier access to technology, research and
development, a wider global market and reduced cost of capital along with other
benefits increase the competitiveness of Indian entities and boost their brand
value. These overseas investments are also important drivers of foreign trade
and technology transfer thus boosting domestic employment, investment and
growth through such interlinkages.
2.
In keeping with the spirit of liberalisation and to
promote ease of doing business, the Central Government and the Reserve Bank of
India have been progressively simplifying the procedures and rationalising the rules and regulations under the Foreign
Exchange Management Act, 1999. In this direction, a significant step has been
taken with operationalisation of a new Overseas
Investment regime. Foreign Exchange Management (Overseas Investment) Rules,
2022 have been notified by the Central Government vide Notification No. G.S.R.
646(E) dated August 22, 2022 and Foreign Exchange Management (Overseas
Investment) Regulations, 2022 have been notified by the Reserve Bank vide
Notification No. FEMA 400/2022-RB dated August 22, 2022 in supersession of the
Notification No. FEMA 120/2004-RB dated July 07, 2004 [Foreign Exchange
Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations,
2004] and Notification No. FEMA 7 (R)/2015-RB dated January 21, 2016 [Foreign
Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015]. The new regime simplifies
the existing framework for overseas investment by persons resident in India to
cover wider economic activity and significantly reduces the need for seeking
specific approvals. This will reduce the compliance burden and associated
compliance costs.
3.
Some of the significant changes brought about through the new 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.
4.
The detailed operational instructions in this regard are given in Annex-I. The
instructions contained in these directions shall supersede the instructions
contained in the circulars listed in Annex-II.
5.
The revised reporting forms and instructions for filling up the forms under the
new regime are being provided on Reserve Bank’s website in Part VIII of the
Master Direction no. 18 on ‘Reporting under Foreign Exchange Management Act,
1999’ dated January 01, 2016.
6.
AD banks may bring the contents of the circular to the notice of their
customers/constituents concerned.
7.
The directions contained in this circular have been issued under Section 10(4)
and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are
without prejudice to permissions/ approvals, if any, required under any other
law.
Annex-I
Foreign Exchange Management (Overseas Investment)
Directions, 2022
(Annexed
to AP DIR Circular No. 12 dated August 22, 2022)
These Directions shall be called Foreign Exchange
Management (Overseas Investment) Directions, 2022 (hereinafter referred to as
“OI Directions”) which shall be read with the provisions contained in Foreign
Exchange Management (Overseas Investment) Rules, 2022 (hereinafter referred to
as “OI Rules”) and Foreign Exchange Management (Overseas Investment)
Regulations, 2022 (hereinafter referred to as “OI Regulations”).
|
INDEX Para. No. |
Particulars |
Page No. |
|
1 |
Part
I - Definitions and associated details |
4 |
|
|
Part
II – General provisions |
6 |
|
2 |
Exemptions from applicability of OI
Rules/Regulations/Directions |
6 |
|
3 |
Permission for making overseas investment |
7 |
|
4 |
Approval from the Central Government |
8 |
|
5 |
Approval from the Reserve Bank |
8 |
|
6 |
No Objection Certificate (NOC) from the lender
bank/regulatory body/investigative agency |
8 |
|
7 |
Rights issue and bonus shares |
9 |
|
8 |
Acquisition of a foreign entity through bidding or
tender procedure |
9 |
|
9 |
ODI in startups |
9 |
|
10 |
Acquisition or transfer by way of deferred payment |
9 |
|
11 |
Mode of Payment |
10 |
|
12 |
Pricing Guidelines |
10 |
|
13 |
Transfer or liquidation |
11 |
|
14 |
Restructuring |
11 |
|
15 |
Opening of Foreign Currency Account abroad by an
Indian entity |
11 |
|
16 |
Obligations of the Person Resident in India |
12 |
|
17 |
Reporting |
12 |
|
18 |
Delay in Reporting |
13 |
|
19 |
Restriction on further financial commitment or
transfer |
14 |
|
20 |
Restrictions and prohibitions |
14 |
|
|
Part
III – Specific provisions |
15
|
|
21 |
Financial commitment by an Indian entity |
15 |
|
22 |
Overseas investment by resident individuals |
18 |
|
23 |
Overseas investment by a person resident in India,
other than an Indian entity or a resident individual |
19 |
|
24 |
Overseas investment in an IFSC in India by a person
resident in India |
20 |
|
25 |
Acquisition or Transfer of Immovable Property
outside India |
21 |
|
|
Part
IV - Other Operational Instructions to AD banks |
21
|
|
26 |
Designated banks |
21 |
|
27 |
Overseas investment under OI Rules/Regulations |
21 |
|
28 |
General procedural instructions for online reporting
|
23 |
|
- |
Annex-II: List of the circulars/ master direction
superseded |
24 |
|
- |
Appendix A: Request Form for creation of user id in
the OID Application |
26 |