Department of Economic Affairs Amends Foreign Exchange Management Rules Following Union Budget 2024-25

In pursuance of the Union Budget 2024-25 announcement by Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman to simplify rules and regulations for Foreign Direct Investment and Overseas Investment, as one of the initiatives, the Department of Economic Affairs (DEA), Ministry of Finance, has amended Foreign Exchange Management (Non-debt Instruments) Rules, 2019 vide notification dated 16.08.2024.

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The amendments aim to simplify cross-border share swaps and provide for the issue or transfer of Indian company equity instruments in exchange for foreign company equity instruments. This will facilitate the global expansion of Indian companies through mergers, acquisitions, and other strategic initiatives, enabling them to reach new markets and grow their presence worldwide. Another key change brings further clarity on the treatment of downstream investments made by Overseas Citizen of India (OCI)-owned entities on a non-repatriation basis, aligning it with the treatment of Non-Resident Indian (NRI)-owned entities.

Other changes include:

• Standardizing the definition of ‘control’ to ensure consistency with other Acts and laws
• Enabling Foreign Direct Investment (FDI) in White Label ATMs to boost financial inclusion nationwide
• Harmonizing the definition of ‘startup company’ with the Government of India’s notification G.S.R. 127 (E) dated February 19, 2019, issued by the Department for Promotion of Industry and Internal Trade.

These amendments underscore the Government’s commitment to creating a foreign-investor-friendly climate, with continued measures to simplify rules and promote Ease of Doing Business.