In August 2022, the Central Government and the Reserve Bank of India (RBI) issued a new framework which includes following regulations:

  • Foreign Exchange Management (Overseas Investment) Rules, 2022 (OI Rules)
  • Foreign Exchange Management (Overseas Investment) Regulations, 2022 (OI Regulations) and 
  • Foreign Exchange Management (Overseas Investment) Directions, 2022 (OI Directions).

The OI Rules supersedes the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015.

The revised framework aims to enhance the ease of doing business in India. The framework introduces some new definitions and provides clarity with respect to various existing definitions e.g. control, Overseas Investment (OI), Overseas Direct Investment (ODI), Overseas Portfolio Investment (OPI), foreign entity, step down subsidiary etc. It also provides clarity in certain rules to help with the implementation. Additionally, the revised OI Rules and regulations aims to provide clarity on various concepts such as the distinction between ODI and OPI Rules, liberalisation of round tripping structure, introduction of arm’s-length criteria for issue/transfer of equity capital or debt by a foreign entity, statutory auditor’s certificate for undertaking ODI and for Annual Performance Report etc.

In this session we discussed the key changes and requirements introduced under the new framework of overseas investment.