RBI issues Master Direction on Foreign investment in India
Foreign Investment in India is regulated in terms of clause (b) sub-section 3 of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (FEMA) read with Foreign Exchange Management (Transfer or Issue of a Security by a Person resident Outside India) Regulations, 2017.
The Foreign Exchange Management Act, 1999 (FEMA) empowers the Reserve Bank to frame regulations to prohibit, restrict or regulate transfer or issue of any security by a person resident outside India. These regulations are notified as Foreign Exchange Management (Transfer or Issue of Security by a Person resident Outside India) Regulations, 2017.
Reserve Bank of India has revised the Regulations on foreign investment in India and has repealed and replaced the Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 (Notification No. FEMA 20) and Foreign Exchange Management (Investment in a Firm or Proprietary Concern in India) Regulations, 2000 (Notification No. FEMA 24) with the Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2017 (Notification No. FEMA 20(R)).
The master directions inter alia list out prohibited sectors/ persons, entry routes and Permitted sectors, permitted investments by persons resident outside India, mode of payment, pricing guidelines, downstream Investment, taxes and remittance of sale proceeds etc.
The master directions comprises of ten Annexures containing directions on the following:
| Annexure-1 | Purchase/ Sale of capital instruments of an Indian company |
| Annexure-2 | Purchase/ Sale of capital instruments of a listed Indian company on a recognised stock exchange in India by Foreign Portfolio Investors |
| Annexure-3 | Purchase/ Sale of Capital Instruments of a listed Indian company on a recognised stock exchange in India by Non-Resident Indian (NRI) or Overseas Citizen of India (OCI) on repatriation basis |
| Annexure-4 | Investment on non-repatriation basis |
| Annexure-5 | Purchase and sale of securities other than capital instruments by a person resident outside India |
| Annexure-6 | Annex 6 Investment in a Limited Liability Partnership (LLP) |
| Annexure-7 | Investment by a Foreign Venture Capital Investor (FVCI) |
| Annexure-8 | Investment by a person resident outside India in an Investment Vehicle |
| Annexure-9 | Investment in Depository receipts by a person resident outside India |
| Annexure-10 | Issue of Indian Depository Receipts (IDRs) |
