The Finance Ministry came out with an amendment to the Foreign Exchange Management, or Non-debt Instruments Rules, 2019, to rationalize rules on Foreign Direct Investment on Friday. This is meant to make cross-border share swap expenses between companies in the country and abroad more accessible with changes in Budget 2024-25.
Officials said the new rules would strengthen global access for Indian businesses and greatly enhance the ease with which mergers, acquisitions, and other strategic moves can be made for new markets, thereby increasing international footprints. "In pursuance of the Union Budget 2024-25 announcement made by Union Minister for Finance and Corporate Affairs Nirmala Sitharaman to simplify rules and regulations for Foreign Direct Investment and Overseas Investment, as one of the initiatives, the Department of Economic Affairs (DEA), Ministry of Finance, has amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, vide notification dated 16.08.2024."
The changed norms rationalize the process of share swap between a domestic company and a foreign company, including issuance and transfer of equity instruments between an Indian company and an overseas one. Another very important change has been in respect of clarification that provisions regarding downstream investment would apply to entities owned on a non-repatriation basis by Overseas Citizens of India, similar to entities owned by Non-Resident Indians. Further, these amendments would make a way for FDI in White Label ATMs that could further raise the quantum of financial inclusion in the country.
White Label ATMs (WLAs) refer to the ATMs provided by non-banks or corporates that are under the authorisation from the Reserve Bank of India (RBI). For the customers, it is just like using an ATM of any other bank. The proposed non-bank operated WLAs will take ATM coverage to the semi-urban and rural areas and will deepen customer service.
Other amendments bringing other changes are:- * Bringing out standardization of the definition of 'control' by conforming the uniformity with other acts and rules. * Making the definition of 'startup company' uniform with what Government of India's notification G.S.R. 127 (E) dated 19th February, 2019 issued by the Department for Promotion of Industry and Internal Trade. These amendments make the government even more committed to creating a congenial environment for foreign investors, in coordination with simplification of regulations and active propagation of 'Ease of Doing Business,' the statement concluded.
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