Amendment to Foreign Exchange Management (Non-debt Instruments) Rules 2019

Source- This post on Amendment to Foreign Exchange Management (Non-debt Instruments) Rules 2019 has been created based on the article “Department of Economic Affairs amends Foreign Exchange Management (Non-debt Instruments) Rules, 2019 in pursuance of Union Budget 2024-25 announcement” published in “PIB” on 16 August 2024.

Why in News?

The Department of Economic Affairs (DEA), Ministry of Finance, has amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. This initiative aims to streamline regulations related to Foreign Direct Investment (FDI) and Overseas Investment.

These amendments reflect the Government’s ongoing efforts to create a more foreign-investor-friendly environment by simplifying rules and promoting the Ease of Doing Business in India.

Key Amendments and Objectives

1. Simplification of Cross-Border Share Swaps: The amendments focus on simplifying cross-border share swaps, allowing Indian companies to issue or transfer equity instruments in exchange for foreign company equity instruments. This is expected to facilitate global expansion through mergers, acquisitions, and strategic initiatives.

2. Clarification on Downstream Investments by OCI-owned Entities: The changes provide clarity on the treatment of downstream investments made by entities owned by Overseas Citizens of India (OCI) on a non-repatriation basis, aligning them with the treatment of Non-Resident Indian (NRI)-owned entities.

3. Standardization of ‘Control’ Definition: The definition of ‘control’ has been standardized to ensure consistency across various Acts and laws, promoting greater legal clarity.

4. FDI in White Label ATMs: The amendments enable Foreign Direct Investment (FDI) in White Label ATMs, a move aimed at boosting financial inclusion across the nation.

5. Harmonization of ‘Startup Company’ Definition: The definition of a ‘startup company’ has been harmonized with definition issued by the Department for Promotion of Industry and Internal Trade.

UPSC Syllabus: Indian Economy