Rule 19 - Restrictions and prohibitions - Foreign Exchange Management (Overseas Investment) Rules, 2022

19. Restrictions and prohibitions. (1) Unless otherwise provided in the Act or these rules, no person resident in India shall make ODI in a foreign entity engaged in (a) real estate activity; (b) gambling in any form; and (c) dealing with financial products linked to the Indian rupee without specific approval of the Reserve Bank. Explanation. For the purposes of this sub-rule, the expression real estate activity means buying and selling of real estate or trading in Transferable Development Rights but does not include the development of townships, construction of residential or commercial premises, roads or bridges for selling or leasing. (2) Any ODI in start-ups recognised under the laws of the host country or host jurisdiction as the case may be, shall be made by an Indian entity only from the internal accruals whether from the Indian entity or group or associate companies in India and in case of resident individuals, from own funds of such an individual. (3) No person resident in India shall make financial commitment in a foreign entity that has invested or invests into India, at the time of making such financial commitment or at any time thereafter, either directly or indirectly, resulting in a structure with more than two layers of subsidiaries: Provided that such restriction shall not apply to the following classes of companies mentioned in sub-rule (2) of rule 2 of the Companies (Restriction on Number of Layers) Rules, 2017 as may be amended from time to time, namely:- (a) a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); (b) a non-banking financial company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934) which is registered with the Reserve Bank and considered as systematically important non-banking financial company by the Reserve Bank; (c) an insurance company being a company which carries on the business of insurance in accordance with provisions of the Insurance Act, 1938 (4 of 1938) and the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999); and (d) a Government company referred to in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013).