Amendments in the FEMA, 1999

RBI Updates January 2024

1. Master Direction - Reserve Bank of India (Internal Ombudsman for Regulated Entities) Directions, 2023

On December 29, 2023, RBI introduced Master Direction on Internal Ombudsman to strengthen the Internal Grievance Redress mechanism within a Regulated Entity (RE) and to ensure a proper and speedy resolution of customer complaints.

These Directions integrate and update the erstwhile Internal Ombudsman Schemes issued by the RBI for banks, Non-Banking Financial Companies (NBFCs), Non-bank System Participants (NBSPs), and Credit Information Companies (CICs).

These Directions came into effect on December 29, 2023, and apply to the whole of India.  

This Master Direction brings uniformity in matters like the timeline for escalation of complaints to the Internal Ombudsman (IO), exclusions from escalating complaints to the IO, temporary absence of the IO, minimum qualifications for appointing the IO, and updating reporting formats.

The link for the aforesaid Master Direction is as follows:

2. Master Direction – Reserve Bank of India (Commercial Paper and Non-Convertible Debentures of original or initial maturity up to one year) Directions, 2024

On January 03, 2024, RBI introduced Master Direction on Commercial Paper and Non-Convertible Debentures of original or initial maturity up to one year based on market feedback.

These Directions shall apply to all persons/ agencies dealing in Commercial Paper and/ or Non-Convertible Debentures of original or initial maturity up to one year.  

These Directions inter-alia other provisions, provide for the issuers who are eligible to issue and for the investors who are eligible to invest in the Commercial papers (CPs) and Non-Convertible Debentures (NCDs) and they also entail the general guidelines for issuance of CPs and NCDs.

These Directions shall come into force with effect from April 01, 2024.

The link for the aforesaid Master Direction is as follows: 

3. Risk Management and Inter-Bank Dealings – Hedging of foreign exchange risk

The Foreign Exchange Risk Management facilities have been reviewed based on the feedback received from market participants and the experience gained since the revised framework came into force.

Also, the Directions concerning all types of Foreign Exchange transactions (including cash, tom, and spot) have been consolidated and some of the existing directions are suspended by the RBI.

The revised Directions shall come into effect from April 05, 2024, replacing the existing Directions in Part A (Section I) of the Master Direction – Risk Management and Interbank Dealings dated July 5, 2016.

The link for the aforesaid Circular is as follows:

4. Credit/ Investment Concentration Norms – Credit Risk Transfer

The Guidelines on the Large Exposures Framework (LEF) apply to the NBFC-Upper Layer (NBFC-UL) in terms of paragraph 110 of the Master Direction on NBFC. The NBFC-Base Layer (NBFCBL) and NBFC-Middle Layer (NBFC-ML) are, however, governed by the credit/investment concentration norms prescribed in paragraphs 32 and 91 of the MD on NBFC, paragraph 20 of MD on HFC and circular on Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs dated October 22, 2021.

In order to ensure uniformity and consistency in the computation of concentration norms among NBFCs, a review of the extant concentration norms has been carried out and regulations for NBFC- ML, BL & UL have been issued. 

The link for the aforesaid Circular is as follows: 

5. RBI Bulletin

On January 18, 2024, RBI released its monthly bulletin for January 2024.

The Bulletin includes Six Articles, Seven Speeches, and Current Statistics.

The Six Articles are:

  • State of the Economy
  • Are Food Prices the ‘True’ Core of India’s Inflation?
  • Dynamics of Credit Growth in the Retail Segment: Risk and Stability Concerns
  • Stock-Bond Correlation and the Macroeconomy: Evidence from India
  • Agriculture Supply Chain Dynamics: Evidence from Pan-India Survey, and
  • Climate Stress Testing and Scenario Analysis: Navigating Uncharted Waters.

The link for the Press Release is mentioned below: 

6. The Foreign Exchange Management (Non-debt Instruments) Amendment Rules, 2024

On January 24, 2024, The Department of Economic Affairs (DEA), under the Ministry of Finance, amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (Principal Rule) and notified a new Chapter X ‘Investment by Permissible Holder in Equity Shares of Public Companies incorporated in India and listed on International Exchanges) and Schedule XI as ‘Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme’ (the Scheme) under Principal Rule.

These Rules allow the direct listing of Equity Shares by Indian public companies on International Exchanges.

Some of the Conditions of Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme are as follows:

  1. The permissible holder: of Equity Shares issued by an Indian Public Company is not a person resident in India.
  2. Approval of CG: If the holder of Equity Shares is a citizen of a country that shares a land border with India, or an entity incorporated in such a country, or an entity whose beneficial owner is from such a country, shall hold equity shares of such public Indian company only with the approval of the Central Government.
  3. FPI Limit: The permissible holder may purchase or sell equity shares of an Indian company listed on an international exchange subject to the limit specified for foreign portfolio investmentunder these rules.
  4. Eligibility:The Indian Public Company or the existing holder of the Indian Public Company, can issue or offer Equity Shares if they are not debarred from accessing the capital market, not a willful defaulter, not a fugitive economic offender, and the Indian Public Company is not a under inspection or investigation under the Companies Act, 2013.
  5. Compliance: The Indian Public Company needs to comply with extant laws relating to the issuance of Equity Shares including SCRA, 1956, SEBI, 1992, Depositories Act, 1996, FEMA, 1999, PMLA, 2002 and the Companies Act, 2013 and rules and regulations made there under.
  6. Depositories: The Indian public company may also enter into necessary arrangements with the Indian Depository and Foreign Depository.
  7. Sector Cap:The Indian public company to ensure that the aggregate of equity shares that may be issued or offered in a permissible jurisdiction, along with equity shares already held in India, by persons resident outside India, shall not exceed the limit on foreign holding under the Schedule I to FEMA (NDI) Rules, 2019.
  8. Voting Rights: Such equity Shares may be exercised directly by the permissible holder or through their custodian.
  9. Pricing by Indian listed companies: The Equity Shares Issued or Offered to be at a price not less than the price applicable to a corresponding mode of issuance of such equity shares to domestic investors under the applicable laws.
  10. Pricing by Indian Unlisted Companies: The Initial listingof equity shares by a public unlisted Indian company on the International Exchange, to be at the price of issue or transfer of equity shares shall be determined by a book-building process as permitted by the said International Exchange and shall not be less than the fair market value under applicable rules or regulations under FEMA 1999. However, subsequent issuance or transfer of shares to list additional Equity Shares post initial listing would be based on applicable pricing norms of the International Exchange and the permissible jurisdiction.

The link for the Notification is mentioned below: 

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