RBI Update: Foreign Exchange Management (Overseas Investment) Directions, 2022

Government of India has squash 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).

Further, Central Government has notified Foreign Exchange Management (Overseas Investment) Rules, 2022 vide Notification No. G.S.R. 646(E) dated August 22, 2022. The RBI has notified Foreign Exchange Management (Overseas Investment) Regulations, 2022 vide Notification No. FEMA 400/2022-RB dated August 22, 2022.

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.

The detailed operational instructions in this regard are given in Annex1. 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. AD banks may bring the contents of the circular to the notice of their customers/constituents concerned.

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