Finance Ministry changed FDI and Overseas Investment Rules to Boost Global Business Expansion, Check New Rules Here

In the Union Budget 2024-25, Finance Minister Nirmala Sitharaman highlighted several key changes, one of which involved amendments to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. These changes were officially introduced by the Department of Economic Affairs (DEA) under the Ministry of Finance and were notified on August 16, 2024. The goal? To make it easier for foreign investors and Indian companies to engage in business by simplifying the rules surrounding Foreign Direct Investment (FDI) and Overseas Investment.
Key Amendments to Boost Global Business
One of the most notable changes is the simplification of the rules for cross-border share swaps. Previously, the process for an Indian company to issue or transfer equity instruments in exchange for shares in a foreign company was complicated and often hindered business expansion. With the new amendments, this process has become much simpler, allowing Indian companies to more easily merge, acquire, or form strategic alliances with foreign companies. This change is expected to help Indian businesses expand globally, enter new markets, and strengthen their presence on the international stage.
Clarity for Overseas Citizen of India (OCI)-Owned Entities
Another important amendment focuses on investments by entities owned by Overseas Citizens of India (OCIs). The rules now clarify how investments made by OCI-owned entities on a non-repatriation basis should be treated, aligning them with the rules applicable to investments by Non-Resident Indian (NRI)-owned entities. This alignment removes previous ambiguities and promotes clearer, more transparent investment practices.
Additional Enhancements
The amendments also include several other key changes:
- Standardizing the Definition of ‘Control’: The definition of ‘control’ has been standardized to ensure consistency with other laws and regulations. This change helps to provide a clear and unified understanding across different legal frameworks.
- FDI in White Label ATMs: The amendments now allow for Foreign Direct Investment (FDI) in White Label ATMs. This move is aimed at boosting financial inclusion across India, making it easier for people in remote and underserved areas to access banking services.
- Harmonizing the Definition of ‘Startup Company’: The definition of a ‘startup company’ has been harmonized with the Government of India’s notification from February 2019. This change ensures that startups are consistently recognized and supported under various government schemes and policies.
A Commitment to Ease of Doing Business
The Finance Ministry has stated that these amendments reflect the Indian government’s ongoing commitment to fostering a business-friendly environment for foreign investors. By simplifying the regulatory framework, these changes aim to promote ease of doing business in India, encouraging more foreign investment and supporting the growth of Indian companies on the global stage.