Foreign Exchange Management (Overseas Investment) Directions, 2022

August 22, 2022

All Category – I Authorised Dealer Banks
Madam/Sir

1. Overseas investments by persons resident in India enhance the scale and scope of business
operations of Indian entrepreneurs by providing global opportunities for growth. Such ventures
through easier access to technology, research and development, a wider global market and
reduced cost of capital along with other benefits increase the competitiveness of Indian entities
and boost their brand value. These overseas investments are also important drivers of foreign
trade and technology transfer thus boosting domestic employment, investment and growth
through such interlinkages.

2. 2. In keeping with the spirit of liberalisation and to promote ease of doing business, the Central
   Government and the Reserve Bank of India have been progressively simplifying the procedures
   and rationalising the rules and regulations under the Foreign Exchange Management Act, 1999.
   In this direction, a significant step has been taken with operationalisation of a new Overseas
   Investment regime. Foreign Exchange Management (Overseas Investment) Rules, 2022 have
   been notified by the Central Government vide Notification No. G.S.R. 646(E) dated August 22,
   2022 and Foreign Exchange Management (Overseas Investment) Regulations, 2022 have been
   notified by the Reserve Bank vide Notification No. FEMA 400/2022-RB dated August 22, 2022 in
   supersession of the Notification No. FEMA 120/2004-RB dated July 07, 2004 [Foreign Exchange
   Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2004] and
   Notification No. FEMA 7 (R)/2015-RB dated January 21, 2016 [Foreign Exchange Management
   (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015]. The new
   regime simplifies the existing framework for overseas investment by persons resident in India to
   cover wider economic activity and significantly reduces the need for seeking specific approvals.
   This will reduce the compliance burden and associated compliance costs.

3. 3. Some of the significant changes brought about through the new rules and regulations are
   summarised below:
4. (i) enhanced clarity with respect to various definitions;
5. (ii) introduction of the concept of “strategic sector”;
6. (iii) dispensing with the requirement of approval for:
   1. a. deferred payment of consideration;
   2. b. investment/disinvestment by persons resident in India under investigation by any
   3. investigative agency/regulatory body;
   4. c .issuance of corporate guarantees to or on behalf of second or subsequent level step
   5. down subsidiary (SDS);
   6. d. write-off on account of disinvestment;
7. (iv) introduction of “Late Submission Fee (LSF)” for reporting delays.

4. 4. The detailed operational instructions in this regard are given in Annex-I. The instructions contained in these directions shall supersede the instructions contained in the circulars listed in Annex-II.

5. 5 . The revised reporting forms and instructions for filling up the forms under the new regime are
   being provided on Reserve Bank’s website in Part VIII of the Master Direction no. 18 on ‘Reporting
   under Foreign Exchange Management Act, 1999’ dated January 01, 2016.

6. 6. AD banks may bring the contents of the circular to the notice of their customers/constituents
   concerned.

7. 7. The directions contained in this circular have been issued under Section 10(4) and 11(1) of the
   Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/
   approvals, if any, required under any other law.

Yours faithfully

Ajay Kumar Misra
Chief General Manager-in-Charge

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Notification : https://www.dropbox.com/s/7v2uk6zoi9b93n9/NT110B29188F1C4624C75808B53ADE5175A88.pdf?dl=0