In order to simplify the existing framework for overseas investment by persons resident in India, significantly reduce the need for seeking specific approvals, reduce the compliance burden and associated compliance costs, the Ministry of Finance has issued and notified the Foreign Exchange Management (Overseas Investment) Rules, 2022 and the Reserve Bank of India (“RBI”) has issued and notified the Foreign Exchange Management (Overseas Investment) Regulations, 2022, both on August 22, 2022 (“new regime”) in supersession of Foreign Exchange Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2004 and Foreign Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015 (“old regime”).
RBI would be responsible to administer the aforesaid rules and has the power to issue such directions, circulars, instructions and clarifications as it may deem necessary. Further, RBI has also released the Foreign Exchange Management (Overseas Investment) Directions, 2022 in supersession of all the existing circulars issued by the RBI in relation to overseas investment by persons resident in India.
Stratage Upshots:
- Overseas investment made under the old regime would be deemed to have been made under the new regime;
- Introduction of definitions of: ‘Overseas Portfolio Investment’, ‘strategic sector’, ‘control’;
- Overseas Direct Investment may be undertaken by way of deferred payment;
- No-objection certificate to be obtained in certain cases, including in case of ongoing investigations;
- Condonation of erstwhile delays in reporting by way of late submission fees;
- Approval of RBI is no longer required in case of: (i) issuance of corporate guarantees to or on behalf of second level step down subsidiary; and (ii) restructuring / write- offs;
- Ease of pricing guidelines
- Financial commitment by way of investment in debt instruments.
For a detailed comparative analysis of the new regime from the old regime in relation to Overseas Investment as well as the key changes that have been freshly introduced in the new regime, please click the link below.