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Central Government notifies Overseas Investment Rules and Regulations - (22 Aug 2022)


Central Government and Reserve Bank of India notifies Foreign Exchange Management (Overseas Investment) Rules, 2022 and RBI notifies Foreign Exchange Management (Overseas Investment) Regulations, 2022. The new regime simplifies the existing framework for overseas investment by persons resident in India to cover wider economic activity and significantly, reduces the need for seeking specific approvals. This will reduce the compliance burden and associated compliance costs. Overseas investments by persons resident in India enhance the scale and scope of business operations of Indian entrepreneurs by providing global opportunities for growth.

Some of the significant changes brought about through the new rules and regulations are enhanced clarity with respect to various definitions, introduction of the concept of “strategic sector”, dispensing with the requirement of approval for:

a. deferred payment of consideration

b. investment/disinvestment by persons resident in India under investigation by any investigative agency/regulatory body

c. issuance of corporate guarantees to or on behalf of second or subsequent level step down subsidiary (SDS)

d. write-off on account of disinvestment

In view of the evolving needs of businesses in India, in an increasingly integrated global market, there is need of Indian corporates to be part of global value chain. The revised regulatory framework for overseas investment provides for simplification of the existing framework for overseas investment and has been aligned with the current business and economic dynamics. Clarity on Overseas Direct Investment and Overseas Portfolio Investment has been brought in and various overseas investment related transactions that were earlier under approval route are now under automatic route, significantly enhancing "Ease of Doing Business".


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