Executive Summary:
This notification, issued by the Reserve Bank of India, amends the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000. These amendments, known as the Thirteenth Amendment Regulations, 2016, pertain to foreign investment in Other Financial Services. The regulations came into force from September 09, 2016, the date of their publication in the Official Gazette.
Key Points / Main Content:
Amendment Details:
* Schedule 1 of Notification No. FEMA 20/2000-RB dated May 3, 2000 is amended.
* Paragraph F.8 in Annex B of Schedule 1 is substituted with revised regulations for "Other Financial Services."
Regulations for Other Financial Services (F.8):
* 100% Automatic route is available for Financial Services activities regulated by financial sector regulators (RBI, SEBI, IRDA, PFRDA, NHB, or any other regulator notified by the Government of India).
* Foreign investment in 'Other Financial Services' is subject to conditionalities, including minimum capitalization norms as specified by the concerned Regulator/Government Agency.
* If 'Other Financial Services' activities are not fully regulated by a Financial Sector Regulator, or there is doubt regarding regulatory oversight, 100% foreign investment is allowed under the Government approval route, subject to conditions, including minimum capitalization requirements, as decided by the Government.
* Activities specifically regulated by an Act will have foreign investment limits restricted to the levels specified in that Act.
* Downstream investments by entities engaged in "Other Financial Services" are subject to extant sectoral regulations and Foreign Exchange Management regulations.
Impact Analysis:
Financial Sector Regulators (RBI, SEBI, IRDA, PFRDA, NHB, etc.):
* Impact: Need to consider the amended regulations when overseeing foreign investment in entities they regulate.
* Action Required: Ensure compliance with the new guidelines and specify conditionalities, including minimum capitalization norms, for entities under their purview.
Entities Engaged in "Other Financial Services":
* Impact: Subject to revised regulations regarding foreign investment, potentially affecting their capital structure and operational activities.
* Action Required: Assess current foreign investment levels and ensure compliance with the new regulations, including any minimum capitalization requirements. If not fully regulated, prepare for the Government approval route.
Government of India:
* Impact: Responsible for approving foreign investment in "Other Financial Services" activities that are not fully regulated by Financial Sector Regulators.
* Action Required: Establish conditions, including minimum capitalization requirements, for foreign investment approvals in partially or unregulated financial services activities.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking sector and managing foreign exchange.
Foreign Exchange Management Act, 1999: An Act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Foreign Exchange Management Transfer or Issue of Security by a Person Resident outside India Regulations, 2000: Regulations issued by the Reserve Bank of India governing the transfer or issue of security by a person resident outside India.
Mumbai, Maharashtra: The city in which the Central Office of the Reserve Bank of India's Foreign Exchange Department is located.
Foreign Exchange Management Transfer or Issue of Security by a Person Resident outside India Thirteenth Amendment Regulations, 2016: The specific amendment regulations being issued by the Reserve Bank of India.
Official Gazette: A public journal or newspaper of record in which government or legal notices are published.
Securities and Exchange Board of India (SEBI): The regulator of the securities market in India.
Insurance Regulatory and Development Authority (IRDA): An autonomous body which regulates and develops the insurance industry in India.
Reserve Bank of India
Foreign Exchange Department
Central Office
Mumbai – 400 001
Notification No.FEMA.375/2016-RB September 09, 2016
Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) (Thirteenth Amendment) Regulations, 2016
In exercise of the powers conferred by clause (b) of sub-section (3) of Section 6 and Section 47 of the Foreign
Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in
the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000
(Notification No. FEMA. 20/2000-RB dated 3rd May 2000) namely:-
1. Short Title & Commencement:-
(i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) (Thirteenth Amendment) Regulations, 2016.
(ii) They shall come into force from the date of their publication in the Official Gazette.
2. Amendment to Schedule 1
In Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000,
(Notification No. FEMA 20/2000-RB dated 3rd May 2000), in Schedule 1, in Annex B, Paragraph F.8 shall be
substituted by the following, namely:-
F.8 Other Financial Services
Financial Services activities regulated by financial 100% Automatic
sector regulators, viz., RBI, SEBI, IRDA, PFRDA, NHB
or any other financial sector regulator as may be notified
by the Government of India.
F.8.1 Other Conditions
i. Foreign investment in 'Other Financial Services' activities shall be subject to
conditionalities, including minimum capitalization norms, as specified by the concerned
Regulator/Government Agency.
ii. 'Other Financial Services' activities need to be regulated by one of the Financial Sector
Regulators. In all such financial services activity which are not regulated by any Financial
Sector Regulator or where only part of the financial services activity is regulated or where there
is doubt regarding the regulatory oversight, foreign investment up to 100% will be allowed
under Government approval route subject to conditions including minimum capitalization
requirement, as may be decided by the Government.
iii. Any activity which is specifically regulated by an Act, the foreign investment limits will be
restricted to those levels/limit that may be specified in that Act, if so mentioned.
iv. Downstream investments by any of these entities engaged in "Other Financial Services" will be
subject to the extant sectoral regulations and provisions of Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, as
amended from time to time.”
(Shekhar Bhatnagar)
Chief General Manager-In ChargeFoot Note:-
The Principal Regulations were published in the Official Gazette vide G.S.R. No.406 (E) dated May 8, 2000 in Part II,
Section 3, sub-Section (i) and subsequently amended as under:-
G.S.R.No. 158(E) dated 02.03.2001
G.S.R.No. 175(E) dated 13.03.2001
G.S.R.No. 182(E) dated 14.03.2001
G.S.R.No. 4(E) dated 02.01.2002
G.S.R.No. 574(E) dated 19.08.2002
G.S.R.No. 223(E) dated 18.03.2003
G.S.R.No. 225(E) dated 18.03.2003
G.S.R.No. 558(E) dated 22.07.2003
G.S.R.No. 835(E) dated 23.10.2003
G.S.R.No. 899(E) dated 22.11.2003
G.S.R.No. 12(E) dated 07.01.2004
G.S.R.No. 278(E) dated 23.04.2004
G.S.R.No. 454(E) dated 16.07.2004
G.S.R.No. 625(E) dated 21.09.2004
G.S.R.No. 799(E) dated 08.12.2004
G.S.R.No. 201(E) dated 01.04.2005
G.S.R.No. 202(E) dated 01.04.2005
G.S.R.No. 504(E) dated 25.07.2005
G.S.R.No. 505(E) dated 25.07.2005
G.S.R.No. 513(E) dated 29.07.2005
G.S.R.No. 738(E) dated 22.12.2005
G.S.R.No. 29(E) dated 19.01.2006
G.S.R.No. 413(E) dated 11.07.2006
G.S.R.No. 712(E) dated 14.11.2007
G.S.R.No. 713(E) dated 14.11.2007
G.S.R.No. 737(E) dated 29.11.2007
G.S.R.No. 575(E) dated 05.08.2008
G.S.R.No. 896(E) dated 30.12.2008
G.S.R.No. 851(E) dated 01.12.2009
G.S.R.No. 341 (E) dated 21.04.2010
G.S.R.No. 821 (E) dated 10.11.2012
G.S.R.No. 606(E) dated 03.08.2012
G.S.R.No. 795(E) dated 30.10.2012
G.S.R.No. 796(E) dated 30.10.2012
G.S.R. No. 797(E) dated 30.10.2012
G.S.R.No. 945 (E) dated 31.12.2012
G.S.R. No.946(E) dated 31.12.2012
G.S.R. No.38(E) dated 22.01.2013G.S.R.No.515(E) dated 30.07.2013
G.S.R.No.532(E) dated 05.08.2013
G.S.R. No.341(E) dated 28.05.2013
G.S.R.No.344(E) dated 29.05.2013
G.S.R. No.195(E) dated 01.04.2013
G.S.R.No.393(E) dated 21.06.2013
G.S.R.No.591(E) dated 04.09.2013
G.S.R.No.596(E) dated 06.09.2013
G.S.R.No.597(E) dated 06.09.2013
G.S.R.No.681(E) dated 11.10.2013
G.S.R.No.682(E) dated 11.10.2013
G.S.R. No.818(E) dated 31.12.2013
G.S.R. No.805(E) dated 30.12.2013
G.S.R.No.683(E) dated 11.10.2013
G.S.R.No.189(E) dated 19.03.2014
G.S.R.No.190(E) dated 19.03.2014
G.S.R.No.270(E) dated 07.04.2014
G.S.R.No. 361 (E) dated 27.05.2014
G.S.R.No.370(E) dated 30.05.2014
G.S.R.No.371(E) dated 30.05.2014
G.S.R.No. 435 (E) dated 08.07.2014
G.S.R.No. 400 (E) dated 12.06.2014
G.S.R.No. 436 (E) dated 08.07.2014
G.S.R.No. 487 (E) dated 11.07.2014
G.S.R.No. 632 (E) dated 02.09.2014
G.S.R.No. 798 (E) dated 13.11.2014
G.S.R.No. 799 (E) dated 13.11.2014
G.S.R.No. 800 (E) dated 13.11.2014
G.S.R.No. 829 (E) dated 21.11.2014
G.S.R.No. 906(E) dated 22.12.2014
G.S.R.No. 914 (E) dated 24.12.2014
G.S.R.No. 30 (E) dated 14.01.2015
G.S.R.No. 183 (E) dated 12.03.2015
G.S.R.No. 284 (E) dated 13.04.2015
G.S.R.No. 484 (E) dated 11.06.2015
G.S.R.No. 745 (E) dated 30.09.2015
G.S.R.No. 759 (E) dated 06.10.2015
G.S.R.No. 823 (E) dated 30.10.2015
G.S.R.No. 858 (E) dated 16.11.2015
G.S.R.No. 983 (E) dated 17.12.2015
G.S.R.No. 165 (E) dated 15.02.2016
G.S.R.No. 166 (E) dated 15.02.2016G.S.R.No. 369 (E) dated 30.03.2016
G.S.R.No. 537 (E) dated 20.05.2016
Published in the Official Gazette of Government of
India – Extraordinary – Part-II, Section 3,
Sub-Section (i) dated 09.09.2016- G.S.R.No.879 (E)