The Department of Economic Affairs (DEA) under the Ministry of Finance has amended the Foreign Exchange Management Rules 2019.
- It aims to simplify regulations related to Foreign Direct Investment (FDI) and Overseas Investment.
Key highlights of the amended rules:
Cross-border share swaps:
- Simplifies the process of cross-border share swaps, allowing Indian companies to issue or transfer equity instruments in exchange for foreign company equity instruments. This change aims to facilitate global expansion through mergers, acquisitions, and strategic initiatives.
Clarification on downstream investments by OCI-owned entities:
- Provides clear guidelines on the treatment of downstream investments made by entities owned by Overseas Citizens of India (OCI) on a non-repatriation basis, aligning them with Non-Resident Indian (NRI)-owned entities.
Standardization of ‘control’ definition:
- Standardizes the definition of ‘control’ across various Acts and laws, ensuring greater legal clarity and consistency.
FDI in White Label ATMs:
- Allows 100% FDI under the Automatic Route in White Label ATMs, aiming to boost financial inclusion across India by enabling non-banks to set up and operate ATMs.
Harmonization of ‘startup company’ definition:
- Align the definition of a ‘startup company’ with the 2019 Department for Promotion of Industry and Internal Trade notification.
- A startup is defined as an entity up to 10 years old, incorporated as a private limited company, partnership firm, or LLP, with a turnover not exceeding ₹100 crore in any financial year since incorporation.
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Frequently Asked Question:
What are the Foreign Exchange Management (Non-debt Instruments) Rules, 2019?
These rules govern Foreign Direct Investment (FDI) and overseas investments in India, recently amended for simplification.
What changes were made to cross-border share swaps in the amended rules?
The amendments simplify the process, allowing Indian companies to exchange equity instruments with foreign companies, facilitating global expansion.
How do the amended rules affect OCI-owned entities?
The rules provide clear guidelines on downstream investments by OCI-owned entities, aligning them with NRI-owned entities.