Foreign Exchange Management (Overseas Investment) Rules, 2022

Why in the News?

Recently, the Ministry of Finance released the Foreign Exchange Management (Overseas Investment) Rules, 2022.

• It subsumed the extant regulations for Overseas Investments and Acquisition and Transfer of Immovable Property Outside India Regulations, 2015.

Key Points:

• Current overseas investment in India is governed by:
  • The Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 and 
  • The Foreign Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015.

Need for the new rules:

• Evolving needs of businesses in India
• Increasingly integrated global market
• Increasing need of Indian corporates to be part of the global value chain

What are the new rules:

• No-Objection Certificate:  Any Indian wilful defaulter have to seek an no objection certificate before making any overseas financial commitment.
• Annual Performance Report (APR):  Any resident in India acquiring equity capital in a foreign entity have to submit an Annual Performance Report (APR) for each foreign entity, every year.
• Liberalised Remittance Scheme– Any resident individual can make overseas direct investment (ODI) by way of investment in equity capital subject to overall ceiling under Liberalised Remittance Scheme.
• Prohibitions– The new rules prohibit making investments into foreign entities that are engaged in real estate and gambling in any form.

Significance:

• Easy for the domestic corporate to invest abroad
• Simplification of the existing framework
• Alignment with the current business and economic dynamics.
• Promoting ease of doing business