Foreign Exchange Management (Overseas Investment) Regulations, 2022

August 22, 2022

In exercise of the powers conferred by sub-section (1) and clause (a) of sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank hereby makes the following regulations, namely:–

1. 1. Short title and commencement.– (1) These regulations may be called the Foreign Exchange Management (Overseas Investment) Regulations, 2022

(2) They shall come into force on the date of their publication in the Official Gazette.

2. Definitions.– (1) In these regulations, unless the context otherwise requires,–

(a) “Act” means the Foreign Exchange Management Act, 1999 (42 of 1999);

(b) “debt instruments” shall have the same meaning as assigned to it in the Foreign Exchange
Management (Overseas Investment) Rules, 2022;

(2) The words and expressions used but not defined in these regulations shall have the meanings
respectively assigned to them in the Act or the Foreign Exchange Management (Overseas Investment)
Rules, 2022.

3. 3. Financial commitment by Indian entity by modes other than equity capital,– (1) The Indian entity
   may lend or invest in any debt instrument issued by a foreign entity or extend non-fund based
   commitment to or on behalf of a foreign entity including overseas step down subsidiaries of such Indian
   entity subject to the following conditions within the financial commitment limit as prescribed in the Foreign Exchange Management (Overseas Investment) Rules, 2022:–
   1. (i) the Indian entity is eligible to make Overseas Direct Investment (ODI);
   2. (ii) the Indian entity has made ODI in the foreign entity;
   3. (iii) the Indian entity has acquired control in such foreign entity at the time of making such financial commitment.

2. The financial commitments under regulations 4, 5, 6 and 7 shall be reckoned towards the financial
commitment limit referred to in sub-regulation (1).

4. 4. Financial commitment by Indian entity by way of debt.– An Indian entity may lend or invest in any
   debt instruments issued by a foreign entity subject to the condition that such loans are duly backed by a
   loan agreement where the rate of interest shall be charged on an arm’s length basis.
   1. Explanation.–– For the purpose of this regulation, the expression “arm’s length” means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest.

5. 5. Financial commitment by way of guarantee.– (1) The following guarantees may be issued to or on
   behalf of the foreign entity or any of its step down subsidiary in which the Indian entity has acquired
   control through the foreign entity, namely:–
   1. (i) corporate or performance guarantee by such Indian entity;
   2. (ii) corporate or performance guarantee by a group company of such Indian entity in
   3. India, being a holding company (which holds at least 51 per cent. stake in the Indian
   4. entity) or a subsidiary company (in which the Indian entity holds at least 51 per cent.
   5. stake) or a promoter group company, which is a body corporate;
   6. (iii) personal guarantee by the resident individual promoter of such an Indian entity;
   7. (iv) bank guarantee, which is backed by a counter-guarantee or collateral by the Indian
   8. entity or its group company as above, and issued, by a bank in India.

(2) Where the guarantee is extended by a group company, it shall be counted towards the utilisation of its
financial commitment limit independently and in case of a resident individual promoter, the same shall be
counted towards the financial commitment limit of the Indian entity:

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Notification : https://www.dropbox.com/s/21giql553p6tkpl/FEMA400E3410E8B6F384DF982443E53E6688627.pdf?dl=0