Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2024. - S.O. 3492(E) - Foreign Exchange Management

MINISTRY OF FINANCE (Department of Economic Affairs) NOTIFICATION New Delhi, the 16th August, 2024 S.O. 3492(E). In exercise of the powers conferred by clauses (aa) and (ab) of sub-section (2) of section 46 of the Foreign Exchange Management Act, 1999 (42 of 1999) , the Central Government hereby makes the following rules further to amend the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 , namely: 1 . (1) These rules may be called the Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2024. (2) They shall come into force on the date of their publication in the Official Gazette. 2. In the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (hereinafter referred to as the principal rules), in rule 2 , (i) after clause (d), the following clause shall be inserted, namely: (da) control shall have the same meaning as assigned to it in the Companies Act, 2013 and for the purposes of Limited Liability Partnership, shall mean the right to appoint majority of the designated partners, where such designated partners, with specific exclusion to others, have control over all the policies of an LLP; ; (ii) for clause (an), the following clause shall be substituted, namely: - (an) startup company means a private company incorporated under the Companies Act, 2013 (18 of 2013) and identified as startup under the notification of the Government of India number G.S.R. 127 (E), dated the 19th February, 2019 issued by the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, as amended from time to time; . 3 . In the principal rules , in rule 9 , in clause (1), in the proviso, for item (i), the following item shall be substituted, namely: (i) prior Government approval shall be obtained for transfer in all cases wherever Government approval is applicable. . 4. In the principal rules , after rule 9 , the following rule shall be inserted, namely: - 9A. Swap of equity instruments and equity capital . The transfer of equity instruments of an Indian company between a person resident in India and a person resident outside India may be by way of (i) swap of equity instruments, in compliance with the rules prescribed by the Central Government and the regulations specified by the Reserve Bank from time to time; (ii) swap of equity capital of a foreign company in compliance with the rules prescribed by the Central Government including the Foreign Exchange Management, (Overseas Investment) Rules, 2022, and the regulations specified by the Reserve Bank from time to time: Provided that prior Government approval shall be obtained for transfer in all cases wherever Government approval is applicable. Explanation. For the purposes of this clause, the expression equity capital shall have the same meaning as assigned to it in the Foreign Exchange Management, (Overseas Investment) Rules, 2022, as amended from time to time. . 5 . In the principal rules , in rule 23 , after sub-rule (7), in the explanation, (i) sub-clause (d) shall be omitted; (ii) in sub-clause (i), for the explanation, the following explanation shall be substituted, namely: - Explanation . An investment made by an Indian entity which is owned and controlled by a Non-Resident Indian or an Overseas Citizen of India including a company, a trust and a partnership firm incorporated outside India and owned and controlled by a Non-Resident Indian or an Overseas Citizen of India, on a non-repatriation basis in compliance with Schedule IV of these rules, shall not be considered for calculation of indirect foreign investment. . 6 . In the principal rules , in Schedule I , (i) in paragraph (1), for sub-paragraph (d), the following sub-paragraph shall be substituted, namely: (d) An Indian company may issue, subject to compliance with the rules prescribed by the Central Government and the regulations specified by the Reserve Bank from time to time, equity instruments to a person resident outside India against, (i) swap of equity instruments; or (ii) import of capital goods or machinery or equipment (excluding second hand machinery); or (iii) pre-operative or pre-incorporation expenses (including payments of rent, etc.); (iv) swap of equity capital of a foreign company in compliance with the rules prescribed by the Central Government including Foreign Exchange Management, (Overseas Investment) Rules 2022, and the regulations specified by the Reserve Bank from time to time. Explanation . For the purposes of this clause, the expression equity capital shall have the same meaning as assigned to it in the Foreign Exchange Management, (Overseas Investment) Rules, 2022, as amended from time to time: Provided that Government approval shall be obtained in all cases wherever Government approval is applicable and the applications for approval shall be made in the manner prescribed by the Central Government from time to time. ; (ii) in paragraph (3), in clause (a), for sub-clause (iii), the following sub-clause shall be substituted, namely: (iii) The aggregate foreign portfolio investment up to the sectoral or statutory cap shall not require Government approval or compliance of sectoral conditions as the case may be, if such investment does not result in transfer of ownership and/ or control of the resident Indian company from resident Indian citizens to persons resident outside India and other investments by a person resident outside India shall be subject to the conditions of Government approval and compliance of sectoral conditions as laid down in these rules. ; (iii) in the table, after SL. No. F.10 and the entries relating thereto, the following SL. No. and entries shall be inserted, namely: SL. No. (1) Sector/ Activity (2) Sectoral Cap (3) Entry Route (4) F.11 White Label ATM Operations (WLAO) 100% Automatic F.11.1 Other conditions (a) Any non-bank entity intending to set up White Label ATMs (WLAs) should have a minimum net worth of one hundred crore rupees as per the latest financial year s audited balance sheet, to be maintained at all times. (b) In case the entity is also engaged in any Other Financial Services referred to in Sl. No. F.10 above, then the foreign investment in the company setting up WLA shall also comply with the minimum capitalisation norms, if any, for foreign investments in such Other Financial Services . (c) FDI in the WLAO will be subject to the specific criteria and guidelines issued by the Reserve Bank under the Payment and Settlement Systems Act, 2007 (51 of 2007). . 7 . In the principal rules , in Schedule II, in paragraph (1), in sub-paragraph (a), in clause (ii), for the explanation, the following explanation shall be substituted, namely: - Explanation, In case two or more FPI s including foreign Governments or their related entities are having common ownership, directly or indirectly, of more than fifty percent or common control, all such FPI s shall be treated as forming part of an investor group. . 8 . In the principal rules , in Schedule VII , in paragraph (1), for sub-paragraph (iii), the following sub-paragraph shall be substituted, namely: (iii) equity or equity linked instrument or debt instrument issued by an Indian startup company irrespective of the sector in which the startup company is engaged: Provided that if the investment is in equity instruments, then the sectoral caps, entry routes and attendant conditions shall apply. . [F. No. 1/8/2024-EM] SURBHI JAIN, Jt. Secy. Note : The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide number S.O.3732 (E), dated the 17th October, 2019 and subsequently amended vide notification numbers: - (i) S.O. 4355 (E), dated the 5th December 2019; (ii) S.O. 1278 (E), dated the 22nd April, 2020; (iii) S.O. 1374 (E), dated the 27th April, 2020; (iv) S.O. 2442 , dated the 27th July, 2020; (v) S.O. 4441 (E), dated the 8th December, 2020; (vi) S.O. 3206 (E), dated the 9th August, 2021; (vii) S.O. 3411 (E), dated the 19th August, 2021; (viii) S.O. 4091 (E), dated the 5th October 2021; (ix) S.O. 4242 (E), dated the 12th October 2021; (x) S.O. 1202 (E), dated 12th April 2022; (xi) S.O. 332 (E), dated 24th January 2024; (xii) S.O. 1361 (E), dated 14th March 2024; and (xiii) S.O. 1722 (E), dated 16th April 2024.