In line with the Union Budget 2024-25 announcement by Finance Minister Nirmala Sitharaman, the Department of Economic Affairs (DEA) under the Ministry of Finance has introduced key amendments to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. The changes, notified on August 16, 2024, aim to streamline Foreign Direct Investment (FDI) and Overseas Investment regulations, fostering a more favorable environment for foreign investors and Indian companies.
One of the most significant amendments simplifies the rules for cross-border share swaps, allowing Indian companies to issue or transfer equity instruments in exchange for foreign company equity instruments. This move is expected to facilitate the global expansion of Indian businesses through mergers, acquisitions, and strategic alliances, enabling them to enter new markets and enhance their international presence.
Additionally, the amendments provide greater clarity on the treatment of downstream investments by Overseas Citizen of India (OCI)-owned entities on a non-repatriation basis, aligning it with the treatment of investments by Non-Resident Indian (NRI)-owned entities. This alignment is intended to remove ambiguities and encourage more transparent investment practices.
Other notable changes include:
-Standardizing the definition of 'control' to ensure consistency with other Acts and laws
-Enabling Foreign Direct Investment (FDI) in White Label ATMs to boost financial inclusion nationwide
-Harmonizing the definition of 'startup company' with the Government of India's notification G.S.R. 127 (E) dated February 19, 2019, issued by the Department for Promotion of Industry and Internal Trade.
The Finance Ministry statement says these amendments reflect the Indian government's ongoing commitment to creating a foreign-investor-friendly climate and simplifying the regulatory framework to promote Ease of Doing Business.
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