Apr 28, 2025Amendments to Foreign Exchange Management (Mode of Payment and Reporting of Non- Debt Instruments) Regulations, 2019
The RBI has, by way of a Notification dated January 14, 2025, amended the Foreign Exchange Management (Mode of Payment and Reporting of Non- Debt Instruments) Regulations, 2019 (‘Mode of Payment Regulations’) with an aim to streamline payment methods and reporting for investments by persons residing outside India. The key changes include:
Particulars | Mode of Payment |
Investment by Persons Resident Outside India | In Equity Instruments: i. Earlier transactions could be routed through limited options including inward remittance, or out of funds held in NRE Rupee account / foreign currency (non-resident) accounts (‘FCNR – B’) and escrow accounts. With the current amendment, investment in equity instruments can now be made through inward remittance, or out of funds held in any repatriable foreign currency accounts or Rupee accounts. ii. In the event allotment pursuant to an investment, is not made within 60 days of receipt of payment, the consideration will be refunded to the person concerned by outward remittance through banking channels or by credit to his repatriable foreign currency or Rupee account. Prior to the amendment, the position was the same, except that outward remittance to be made for the purpose of refund could only be made through banking channels or by credit to his NRE / FCNR (B) accounts. With the current amendment, this refund can be made through any repatriable foreign currency or Rupee account. iii. Similarly, sale proceeds can also be credited to any repatriable foreign currency or Rupee account of the person concerned, maintained in accordance with the Mode of Payment Regulations. Previously, such sale proceeds could be credited only to the NRE / FCNR – B accounts of the concerned persons. In Limited Liability Partnerships: i. Investments in Limited Liability Partnerships (‘LLPs’) were earlier made by inward remittance through NRE Rupee account / FCNR – B accounts. Pursuant to the amendment, such investment can now be made through inward remittance through banking channels or out of funds held in any repatriable foreign currency or Rupee account. ii. Similarly, disinvestment proceeds may now be credited to any repatriable foreign currency or Rupee account of the person concerned, maintained in accordance with the Mode of Payment Regulations. Prior to the amendment, the disinvestment proceeds could be credited only to the NRE / FCNR (B) accounts. In Investment Vehicles: i. Prior to the amendment, investments made in investment vehicles, were, inter alia, required to be routed through NRE Rupee account / FCNR – B accounts. Pursuant to the amendment, this may now be additionally routed through or out of funds held in any repatriable foreign currency or Rupee account. ii. Further, prior to the amendment, for a Foreign Portfolio Investors (‘FPI’) or a Foreign Venture Capital Investor (‘FVCI’), to trade in the units of an investment vehicle (listed or to be listed), routing such transactions through their SNRR account was a pre-requisite. With the current amendment, the aforesaid requirement has been deleted. iii. Prior to the amendment the sale proceeds could be remitted outside India or credited to the NRE / FCNR – B / SNRR accounts. The sale / maturity proceeds may be remitted outside India or may be credited to any repatriable foreign currency or Rupee account of the person concerned. |
Investments by FPIs | i. Previously the SNRR Account and the foreign currency account opened by an FPI could be used only and exclusively for investments into India. With the current amendment, only the foreign currency account will be used exclusively for investments into India. ii. FPIs can invest in Indian depository receipts through funds held in a foreign currency account and / or an SNRR Account. |
Investments by FVCIs
| Previously, the SNRR Account and the foreign currency account opened by an FVCI could be used only and exclusively for investments into India. With the current amendment, only the foreign currency account will be used exclusively for investments into India. |
Issue of Convertible Notes by an Indian Start-up | i. A start-up company issuing convertible notes to a person resident outside India could receive the amount of consideration by inward remittance through banking channels or by debit to NRE account / FCNR – B accounts and escrow accounts. Currently, in addition to inward remittance through banking channels, such consideration may be received through debit to any repatriable foreign currency or Rupee account of the person concerned. ii. Similarly, repayment or sale proceeds may be remitted outside India or credited to any repatriable foreign currency or Rupee account of the person concerned, maintained in accordance with the Regulations. Prior to the amendment, repayment or sale proceeds could have been remitted outside India or credited to any NRE Rupee account / FCNR – B accounts. |