INDIA. Mumbai: The Reserve Bank of India (RBI) has issued draft guidelines to rationalize the existing provisions governing overseas investment, after public consultations, intending to promote ease of doing business.
Overseas Investments and acquisition of immovable properties outside India by persons resident in India are presently governed by the provisions contained in Notification No. FEMA 120/RB-2004 dated July 07, 2004(Foreign Exchange Management (Transfer or Issue of any Foreign Security) 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) respectively.
It is proposed to liberalize these provisions and the comments/feedback on the draft rules/regulations are invited from all stakeholders. They may be forwarded through e mail by August 23, with the subject line “Feedback on draft Overseas Investment rules & regulations”, CGM Yogesh Dayal stated in a press release on Monday.
The RBI has placed on its website two documents — draft Foreign Exchange Management (Non-debt Instruments – Overseas Investment) Rules, 2021, and draft Foreign Exchange Management (Overseas Investment) Regulations, 2021.
The Draft Foreign Exchange Management (Non-debt Instruments – Overseas Investment) Rules, 2021 has outlined the restrictions on overseas investments. As per the draft, a person resident in India is prohibited from making Overseas Direct Investment (ODI) in a foreign entity engaged in real estate activity, gambling in any form, and offering financial products linked to Indian Rupee except for products offered in an IFSC.
Also, the overseas investment will remain prohibited a foreign entity located in countries/ jurisdictions that are not Financial Action Task Force (FATF) and International Organization of Securities Commissions (IOSCO) compliant country or any other country/ jurisdiction as may be prescribed by the central government, RBI has stated.
The other draft on Foreign Exchange Management (Overseas Investment) Regulations, 2021 proposes that an Indian entity may lend or invest in any debt instruments issued by a foreign entity subject to such loans duly backed by a loan agreement and the rate of interest shall be charged on an arm’s length basis, among other things.
It may be recalled that in the last few years law enforcement agencies have come across some fugitive economic offenders who have made heavy investment in real estate and have also floated shell companies abroad.