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Date: 23-Apr-2024 Category: Extra Ordinary State: Union Government Country: India

In exercise of the powers conferred by Section 47 of the Foreign Exchange Management Act, 1999 42 of 1999 and consequent to the Foreign Exchange Management

Issued by Reserve Bank of India · Foreign Exchange Department

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Executive Summary & Key Takeaways

What it means

  • The gazette notification introduces the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) (Amendment) Regulations, 2024. This amends the Principal Regulations issued in 2019, concerning payment methods and reporting requirements for non-debt instruments under the Foreign Exchange Management Act (FEMA), 1999.
  • The amendment addresses the mode of payment for the purchase or subscription of equity shares of Indian companies listed on international exchanges and remittance of sale proceeds.
  • It also modifies the reporting requirements related to Foreign Portfolio Investment (FPI) in equity instruments.

Key Changes

  • Regulation 3.1 of the Principal Regulations is amended to include Schedule XI, specifying the mode of payment for the purchase/subscription of equity shares of an Indian company listed on an international exchange. Payments can be made either through banking channels to the Indian company's foreign currency account (held as per FEMA regulations, 2015) or as inward remittance from abroad through banking channels.
  • The proceeds from the sale of equity shares (net of taxes) can be remitted outside India or credited to the permissible holder's bank account maintained as per the Foreign Exchange Management (Deposit) Regulations, 2016.
  • Regulation 4 is amended, modifying the reporting requirements in Form LEC (FII). Authorised Dealer Category-I banks are required to report the purchase/transfer of equity instruments by FPIs on stock exchanges in India to the Reserve Bank. The investee Indian company must report the purchase/subscription of its equity shares on an international exchange by permissible holders (classified as Foreign Portfolio Investment), other than transfers between permissible holders, through an Authorised Dealer Category I bank.

Impact Analysis

Impact on Indian Companies Listed on International Exchanges

  • Action Item: Indian companies listed on international exchanges should update their internal processes and coordinate with their Authorised Dealer Category I banks to ensure compliance with the new reporting requirements.

Impact on Foreign Portfolio Investors (FPIs)

  • Action Item: FPIs should familiarize themselves with the updated regulations and ensure that their transactions comply with the specified payment methods and reporting requirements.

Impact on Authorised Dealer Category-I Banks

  • Action Item: Authorised Dealer Category-I banks should update their reporting systems and train their staff to comply with the new reporting requirements in Form LEC (FII).

Impact on Reserve Bank of India (RBI)

  • Action Item: RBI will need to monitor the implementation of these amendments and provide guidance to stakeholders as needed.

Key Entities Referenced

Reserve Bank of India (RBI): The central bank of India, responsible for regulating foreign exchange and implementing the Foreign Exchange Management Act (FEMA), 1999. Foreign Exchange Management Act (FEMA), 1999: The legal framework governing foreign exchange transactions in India. Authorised Dealer Category-I Banks: Banks authorized by the RBI to deal in foreign exchange. Foreign Portfolio Investors (FPIs): Investors who invest in the financial assets of a country. Form LEC (FII): The form used for reporting purchase/transfer of equity instruments by FPIs to the Reserve Bank of India. Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019: The principal regulations being amended by this notification. Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015: Regulations governing foreign currency accounts held by residents in India. Foreign Exchange Management (Deposit) Regulations, 2016: Regulations governing deposits under FEMA.
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रजिस्ट्री स.ं डी.एल.- 33004/99 REGD. No. D. L.-33004/99 सी.जी.-एम.एच.-अ.-23042024-253830 xxxGIDHxxx CG-MH-E-23042024-253830 xxxGIDExxx असाधारण EXTRAORDINARY भाग III—खण् ड 4 PART III—Section 4 प्राजधकार स ेप्रकाजित PUBLISHED BY AUTHORITY स.ं 273] नई ददल्ली, मगं लर्ार, अप्रलै 23, 2024/र्िै ाख 3, 1946 No. 273] NEW DELHI, TUESDAY, APRIL 23, 2024/VAISAKHA 3, 1946 भारतीय ररज़र् व बकैं (जर्देिी मद्रु ा जर्भाग) (केंद्रीय कायालव य) अजधसचू ना मुंबई, 19 अप्रैल , 2024 जर्देिी मद्रु ा प्रबधं (भगु तान माध्यम तथा गरै -कज़ व जलखतों की ररपोर्टिंग) (सिं ोधन) जर्जनयमार्ली, 2024 अजधसचू ना स.ं फेमा. 395(2)/ 2024-आरबी.— जर्देिी मुद्रा प्रबंध अजधजनयम, 1999 (1999 का 42) की धारा 47 द्वारा प्रदत्त िजियों का प्रयोग करत े हुए और जर्देिी मुद्रा प्रबंध (गरै -कज़व जलखत) जनयम, 2019 के उपरांत, भारतीय ररिर्व बैंक एतद्द्वारा जर्देिी मद्रु ा प्रबंध (भगु तान माध्यम तथा गैर-कज़व जलखतों की ररपोर्टिंग) जर्जनयमार्ली, 2019 [17 अिूबर 2019 की अजधसूचना सं.फे मा.395/2019-आरबी संख्या] (जिसे इसके बाद 'मलू जर्जनयमार्ली’ कहा गया ह)ै को जनम्नानुसार संिोजधत करता ह,ै अथावत : - 1. सजं िप्त नाम एर् ंप्रारंभ (i) यह जर्जनयमार्ली जर्देिी मुद्रा प्रबंध (भगु तान माध्यम तथा गरै -कज़ व जलखतों की ररपोर्टिंग) जर्जनयमार्ली, 2024 कहलाएगी। 2676 GI/2024 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC.4] (ii) यह जर्जनयमार्ली सरकारी रािपत्र म ेंउसके प्रकािन की तारीख से लाग ूहोगी। 2. मलू जर्जनयमार्ली के जर्जनयम 3.1 म ेंसिं ोधन मूल जर्जनयमार्ली के जर्जनयम 3.1 म,ें क्रम संख्या IX के बाद जनम्नजलजखत िोड़ी िाएगँ ी, अथातव :- X. अनसु चू ी XI ए. भगु तान का माध्यम (1) अंतरराष्ट्रीय एक्सचेंि पर सूचीबद्ध दकसी भारतीय कंपनी के साधारण िेयरों की (अनुज्ञेय धारक द्वारा खरीद/अजभदान के जलए प्रजतफल की राजि का भगु तान - भारत म ें जनगजमत (i) समय-समय पर यथासंिोजधत जर्देिी मुद्रा प्रबंध (भारत म ें जनर्ासी व्यजि द्वारा कंपजनयों के साधारण जर्देिी मुद्रा खाते) जर्जनयमार्ली, 2015 के अनुसार धाररत उि भारतीय कंपनी िेयरों की अतं रराष्ट्रीय के जर्देिी मुद्रा खाते म ेंबैंककंग चैनलों के माध्यम से दकया िाएगा; या एक्सचेंिों पर खरीद या (ii) बैंककंग चैनलों के माध्यम से जर्देि से आर्क प्रेषण के रूप में दकया िाएगा। अजभदान स्ट्पष्टीकरण: अंतरराष्ट्रीय एक्सचेंि पर सूचीबद्ध भारतीय कंपनी के साधारण िेयरों की योिना) खरीद/अजभदान से हुए आगम का जर्प्रेषण या तो भारत में जस्ट्थत दकसी बैंक खाते म ें दकया िाएगा या उस भारतीय कंपनी के जर्देिी मुद्रा खाते म ें िमा दकया िाएगा िो समय- समय पर यथासंिोजधत जर्देिी मुद्रा प्रबंध (भारत में जनर्ासी व्यजि द्वारा जर्देिी मुद्रा खाते) जर्जनयमार्ली, 2015 का पालन करत े हुए धाररत दकया गया हो। बी. जबक्रीगत आय का जर्प्रषे ण साधारण िेयरों की जबक्री आय (लागू करों की कटौती के पश्चात) का जर्प्रेषण भारत के बाहर दकया िा सकता ह ै या उसे अनुज्ञेय धारक के ऐस े बैंक खाते में क्रेजडट कराया िा सकेगा जिनका रखरखार् जर्देिी मुद्रा प्रबंध (िमा) जर्जनयमार्ली, 2016 के अनुसार दकया िा रहा हो। 3. मलू जर्जनयमार्ली के जर्जनयम 4 म ेंसिं ोधन मूल जर्जनयमार्ली के जर्जनयम 4 के उप-जर्जनयम (8) में, मौिूदा प्रार्धान को जनम्नजलजखत स े प्रजतस्ट्थाजपत दकया िाएगा, अथावत :- “एलईसी (एफआईआई): (i) प्राजधकृत व्यापारी श्रणे ी-I बैंक भारत म ें जस्ट्थत स्ट्टॉक एक्सचेंिों पर एफपीआई द्वारा इजक्र् टी जलखतों की खरीद/ अतं रण की ररपोर्टिंग ररज़र् वबैंक को फॉमव एलईसी (एफआईआई) में करेंगे।“ (ii) जनर्ेिग्राही भारतीय कंपनी अनुज्ञेय धारकों द्वारा दकसी अतं रराष्ट्रीय एक्सचेंि पर साधारण िेयरों की खरीद/अजभदान (िब ऐसी खरीद/अजभदान को जनयमार्ली के तहत जर्देिी पोटवफोजलयो जर्जनधान के रूप में र्गीकृत दकया गया हो), अनुज्ञेय धारकों के बीच होने र्ाले अतं रण से जभन्न,की ररपोर्टिंग ररज़र्व बैंक को प्राजधकृत व्यापारी श्रेणी I बैंक के माध्यम से फॉमव एलईसी (एफआईआई) में करेगी।’’ लता राधाकृष्णन, प्रभारी महाप्रबंधक [जर्ज्ञापन-III/4/असा./042/2024-25] फुट नोट: मूल जर्जनयमार्ली भारत सरकार के सरकारी रािपत्र में ददनांक 17.10.2019 के िी.एस.आर.सं.795(ई) के माध्यम स े प्रकाजित की गयी थी और तदपु रांत इसका संिोधन जनम्नानुसार दकया गया- अजधसूचना सं.फे मा.395(1)/2020-आरबी [जर्देिी मुद्रा प्रबंध (भगु तान माध्यम तथा गरै -कज़ व जलखतों की ररपोर्टिंग) (संिोधन) जर्जनयमार्ली, 2020] भारत के रािपत्र, असाधारण, भाग III, खंड IV म ें प्रकाजित, राि-पत्र संख्या सीिी- एमएच-ई-19062020-220016 ददनांदकत 18 िून , 2020.[भाग III—खण् ड 4] भारत का रािपत्र : असाधारण 3 RESERVE BANK OF INDIA (Foreign Exchange Department) (Central Office) NOTIFICATION Mumbai, the 19th April, 2024 Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) (Amendment) Regulations, 2024 Notification No. FEMA. 395(2) /2024-RB.—In exercise of the powers conferred by Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999) and consequent to the Foreign Exchange Management (Non-Debt Instrument) Rules, 2019, the Reserve Bank of India hereby makes the following amendments to the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 [Notification No. FEMA.395/2019-RB dated October 17, 2019] (hereinafter referred to as ‘the Principal Regulations’) namely:- 1. Short Title & Commencement (i) These Regulations may be called the Foreign Exchange Management (Mode of Payment and Reporting of Non- Debt Instruments) (Amendment) Regulations, 2024. (ii) They shall come into force from the date of their publication in the Official Gazette. 2. Amendment to Regulation 3.1 of the Principal Regulations In Regulation 3.1 of the Principal Regulations, after Sl no. IX, the following shall be inserted namely: - X. Schedule XI A. Mode of Payment (1) The amount of consideration for purchase / subscription of equity shares of an Indian (Purchase or company listed on an International Exchange shall be paid, - Subscription of Equity (i) through banking channels to a foreign currency account of the Indian company Shares of Companies held in accordance with the Foreign Exchange Management (Foreign currency Incorporated in India accounts by a person resident in India) Regulations, 2015, as amended from time on International to time; or Exchanges Scheme by (ii) as inward remittance from abroad through banking channels. Permissible Holder) Explanation: The proceeds of purchase / subscription of equity shares of an Indian company listed on an International Exchange shall either be remitted to a bank account in India or deposited in a foreign currency account of the Indian company held in accordance with the Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015, as amended from time to time. B. Remittance of sale proceeds The sale proceeds (net of taxes) of the equity shares may be remitted outside India or may be credited to the bank account of the permissible holder maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. 3. Amendment to Regulation 4 of the Principal Regulations In sub-regulation (8) of Regulation 4 of the Principal Regulations, the existing provision shall be substituted by the following, namely: “LEC(FII): (i) The Authorised Dealer Category I banks shall report to the Reserve Bank in Form LEC (FII) the purchase / transfer of equity instruments by FPIs on the stock exchanges in India. (ii) The Investee Indian company through an Authorised Dealer Category I bank shall report to the Reserve Bank in Form LEC (FII) the purchase/subscription of equity shares (where such purchase / subscription is classified as Foreign Portfolio Investment under the rules) by permissible holder, other than transfers between permissible holders, on an International Exchange.” LATHA RADHAKRISHNAN, General Manager-in-Charge [ADVT.-III/4/Exty./042/2024-25] Foot Note : The Principal Regulations were published in the Official Gazette of Government of India vide G.S.R.No.795(E) dated 17.10.2019 in Part II, Section 3, sub-Section (i) and subsequently amended, vide: Notification no. FEMA 395(1)/2020-RB [Foreign Exchange Management (Mode of Payment and Reporting of Non- Debt Instruments) (Amendment) Regulations, 2020] dated June 15, 2020, published in the Gazette of India [Extraordinary, Part III–Section 4], vide Gazette ID CG-MH-E-19062020-220016 dated 18.06.2020. Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064 and Published by the Controller of Publications, Delhi-110054.

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