In an additional effort to promote financial inclusion, India has also permitted FDI in white-label ATMs, which is expected to improve access to banking services in under-served areas
India’s Ministry of Finance announced significant updates to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, on August 16, 2024. The fourth amendment aims to enhance investment flows, particularly in startups, while introducing new requirements for Foreign Direct Investment (FDI) from neighboring countries.
One of the key updates permits Indian companies to issue or transfer equity in exchange for equity in foreign firms, facilitating international mergers, acquisitions, and strategic collaborations. This change is designed to boost the global competitiveness of Indian businesses by simplifying cross-border transactions.
In an additional effort to promote financial inclusion, India has also permitted FDI in white-label ATMs, which is expected to improve access to banking services in under-served areas
The amendment also clarifies the treatment of downstream investments made by entities owned by Overseas Citizens of India (OCI) on a non-repatriation basis. These changes align OCI investment rules with those applied to Non-Resident Indians (NRIs), potentially encouraging greater economic participation from OCI-owned businesses.
Another important aspect of the amendment is the standardization of the definition of ‘control,’ which aims to create consistency across various regulations and reduce compliance burdens for businesses. The updated rules specify that two or more foreign portfolio investors (FPIs), including foreign governments, will be classified as an investor group if they share more than 50 percent common control.
Furthermore, the definition of a ‘startup company’ has been harmonized with the government’s 2019 notification, making it easier for startups to take advantage of government schemes. To qualify, a business must be within 10 years of its incorporation or registration and meet specific criteria regarding turnover and business structure.
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