Amendments in the FEMA, 1999

RBI Updates January 2024

1. Foreign Exchange Management (Deposit) (Fourth Amendment) Regulations, 2024

RBI vide Notification FEMA 5(R)/(4)/2024-RB dated May 06, 2024, notified the Foreign Exchange Management(Deposit) (Fourth Amendment) Regulations, 2024.

According to the amendment, an authorized dealer in India may allow a person resident outside India to open, hold, and maintain an interest-bearing account in Indian Rupees and/or foreign currency for posting and collecting margin in India, for a permitted derivative contract entered into by such person in terms of Foreign Exchange Management (Margin for Derivative Contracts) Regulations, 2020, dated October 23, 2020, as amended from time to time, subject to directions issued by the RBI in this regard.

The link for the aforesaid Notification is as follows:
https://m.rbi.org.in/scripts/BS_FemaNotifications.aspx?Id=12684

2. Issuance of partly paid units to persons resident outside India by investment vehicles under Foreign Exchange Management (Non-debt Instruments) Rules, 2019

Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (NDI Rules) has been amended vide Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2024 (NDI Amendment Rules) thereby enabling issuance of partly paid units to persons resident outside India by investment vehicles.

In view of the above-mentioned amendment RBI vide Circular RBI/2024-25/36 A.P. (DIR Series) Circular No. 7 dated May 21, 2024 has decided to regularise the issuances of partly paid units by
Alternative Investment Funds (AIFs) to persons resident outside India prior to the above-mentioned amendment of NDI Rules through compounding under Foreign Exchange Management Act, 1999.

AIFs before approaching RBI for compounding, AD Category-I banks may ensure that the necessary administrative action, including the reporting of such issuances by AIFs to the RBI, through the FIRMS Portal and issuing of conditional acknowledgements for such reporting, is completed.

The link for the aforesaid Notification is as follows:
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NT362F5EF8FA0945436394C9B0488117D492.PDF

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