As stated in the Budget 2024–25, the Finance Ministry on Friday published a notification modifying the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, to streamline FDI regulations and facilitate simpler cross-border share swaps between Indian and foreign businesses.
According to a statement from the Finance Ministry, this will make it easier for Indian businesses to expand internationally through mergers, acquisitions, and other strategic efforts, giving them access to new markets and increasing their global footprint.
The Department of Economic Affairs (DEA), Ministry of Finance, has amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, vide notification dated 16.08.2024, as one of the initiatives in response to the Union Budget 2024–25 announcement made by Union Minister for Finance and Corporate Affairs Nirmala Sitharaman to simplify rules and regulations for Foreign Direct Investment and Overseas Investment.
The changes provide for the issuance or transfer of equity instruments issued by Indian companies in return for equity instruments issued by foreign companies, with the goal of streamlining cross-border share swaps.
According to the statement, another significant modification clarifies how downstream investments made by entities owned by Overseas Citizens of India (OCI) are treated on a non-repatriation basis. This aligns the treatment of OCI-owned entities with that of NRI-owned entities.
In order to increase financial inclusion across the country, the revisions will also permit Foreign Direct Investment (FDI) in White Label ATMs.
White Label ATMs are ATMs that are installed, owned, and run by businesses other than banks (WLAs). The Reserve Bank of India has authorized non-bank ATM operators (RBI). Using a WLA is similar for a customer to using any bank’s ATM. The goal of allowing non-bank organizations to establish WLAs is to expand the geographic distribution of ATMs in order to improve customer service, particularly in rural and semi-urban areas.
Other modifications brought about by the revisions include:
* Standardizing the meaning of “control” to guarantee conformity with other Acts and legislation
* Bringing the definition of “startup company” into compliance with the Department for Promotion of Industry and Internal Trade’s February 19, 2019, Government of India notice G.S.R. 127 (E).
The statement further stated that these changes highlight the government’s resolve to fostering an environment that is welcoming to international investors by continuing to streamline regulations and advance “Ease of Doing Business.”
