Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) (Amendment) Regulations, 2024
The Reserve Bank of India (RBI), through a notification dated April 23, 2024, has introduced key amendments to the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019. These amendments aim to streamline the process of purchasing or subscribing to equity shares of Indian companies listed on international exchanges and ensure adequate reporting mechanisms for such transactions. The major changes are summarized below:
1. Insertion of Schedule XI in Regulation 3.1
A new schedule, Schedule XI, has been inserted, which addresses the purchase or subscription of equity shares of Indian companies listed on international exchanges by permissible holders. The key provisions under this schedule include:
- Payment Consideration:
The consideration for such purchase or subscription must be made through either:
- Banking channels to a foreign currency account of the Indian company, which is maintained in compliance with the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015.
- Inward remittance from abroad via banking channels.
- Sale Proceeds:
The sale proceeds of these equity shares may be either:
- Remitted outside India.
- Credited to the bank account of a permissible holder, as per the Foreign Exchange Management (Deposit) Regulations, 2016.
2. New Reporting Requirements
However, transfers between permissible holders on an international exchange are exempt from this reporting requirement.
Conclusion
This amendment seeks to create a more structured framework for facilitating cross-border investments in equity shares of Indian companies on international exchanges while ensuring proper reporting and compliance under FEMA. It provides flexibility in terms of payment and remittance options and clarifies the obligations of Indian companies in reporting FPI transactions.
(Reference: Notification No. FEMA. 395(2)/2024-RB dated April 23, 2024)
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