Current · Source: Reserve Bank of India · RBI/2007-2008/215 · issued 19 Dec 2007 · ~1 min read
Quick answerRBI now allows citizens/entities from Bangladesh to invest in Indian shares/convertible debentures under FDI, but only with prior FIPB approval. This relaxes earlier blanket prohibition, yet keeps a government screening gate.
The rule, in the simplest words
People or companies from Bangladesh can now buy shares (small pieces of a company) or convertible debentures (loans that can turn into shares) in Indian companies, but only if they get a special permission called FIPB (a government committee) approval first.
Before this rule, people or companies from Bangladesh were completely banned from buying shares or convertible debentures in India under FDI (foreign direct investment, when a foreigner invests directly in an Indian company).
Banks must check that every Bangladesh investor has FIPB approval before they process the investment, and they must keep a separate record of these cases to show they followed the rules.
How it plays out — a real example
A forex & trade-finance officer in Indore receives a request from a Bangladeshi company wanting to buy shares in an Indian textile firm. The officer first asks for the FIPB approval letter, checks it carefully, and only then processes the investment. She also notes the case in a special file to show the RBI auditor later that she followed the new rule.
What changed
Previously, Regulation 5(1) of FEMA 20/2000 barred all persons/entities from Bangladesh or Pakistan from FDI purchases. The amendment (FEMA 167/2007) inserts a new clause (ii) allowing such investments, provided the investor obtains prior approval from India's Foreign Investment Promotion Board (FIPB). Schedule 1 is also updated to reflect this dual route.
What it means for you
Banks must now process FDI applications from Bangladesh citizens/entities only after verifying FIPB approval. This opens a new, though controlled, channel for cross-border capital flows. Lenders should update their KYC and compliance checklists to include FIPB clearance as a prerequisite for such transactions.
What you must do
Update internal FDI processing guidelines to require FIPB approval for all Bangladesh-origin investors.
Train AD Category-I staff on the new clause (ii) of Regulation 5 and the amended Schedule 1.
Advise customers/constituents about the prior approval requirement before initiating any FDI remittance from Bangladesh.
Maintain separate audit trails for Bangladesh FDI cases to demonstrate regulatory compliance.
Who it affects
AD Category-I banks handling FDI inflows, Indian companies seeking FDI from Bangladesh, Bangladeshi citizens and entities investing in India
❓ Common questions
Does this circular allow automatic route FDI from Bangladesh?
No. All investments by Bangladesh citizens/entities require prior FIPB approval; the automatic route under Schedule 1 does not apply to them.
What documents must a bank collect from a Bangladesh investor?
In addition to standard FDI documentation, banks must obtain a copy of the FIPB approval letter before processing the investment.
Does this amendment affect existing investments from Bangladesh?
The circular is prospective. Existing investments made before the amendment's effective date (publication in official gazette) are not impacted, but any new purchases or conversions require FIPB nod.
📜 Read the original circular — full text as issued by RBI
RBI/2007-2008/215
A.
P. (DIR Series) Circular No. 22
December 19, 2007
To
All
Category - I Authorised Dealer banks
Madam / Sir,
Foreign Direct
Investment by citizen / entity incorporated in Bangladesh
Attention of Authorised
Dealer (AD Category - I) banks is invited to the Foreign Exchange Management (Transfer
or Issue of Security by a Person Resident outside India) Regulations, 2000 notified
vide Notification No. FEMA 20 / 2000 -RB dated May 3, 2000 and as amended from
time to time.
2. In terms of sub-regulation (1) of Regulation 5 of the
Notification ibid, a person resident outside India (other than a citizen of Bangladesh
or Pakistan) or an entity incorporated outside India (other than an entity in
Bangladesh or Pakistan), may purchase shares or convertible debentures of an Indian
company under Foreign Direct Investment Scheme, subject to the terms and conditions
specified in Schedule I to the Notification No. FEMA 20. The Reserve Bank has
since amended the Regulations and notified vide FEMA Notification
No. 167 dated October 23, 2007 (copy enclosed).
3. Accordingly, a person
who is a citizen of Bangladesh or an entity incorporated in Bangladesh may, with
the prior approval of the Foreign Investment Promotion Board of the Government
of India, purchase shares and convertible debentures of an Indian company under
Foreign Direct Investment Scheme, subject to the terms and conditions specified
in Schedule 1 to Notification No. FEMA 20 / 2000 -RB dated May 3, 2000 as amended
from time to time.
4. AD Category - I banks may bring the contents of
the circular to the notice of their customers and constituents concerned.
5.
The directions contained in this circular have been issued under Sections 10(4)
and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without
prejudice to permissions / approvals, if any, required under any other law.
Yours
faithfully,
( Salim Gangadharan )
Chief General Manager
Reserve
Bank of India
Foreign Exchange Department
Central Office
Mumbai- 400
001
Notification No. FEMA. 167/2007-RB
Dated
October 23, 2007
Foreign Exchange Management (Transfer or Issue of Security
by A Person Resident Outside India) (Second Amendment) Regulations, 2007
In
exercise of the powers conferred by clause (b) of sub-section (3) of Section 6
and Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the
Reserve Bank of India hereby makes the following amendments in the Foreign Exchange
Management (Transfer or Issue of Security by A Person Resident Outside India)
Regulations, 2000 (Notification No. FEMA 20/2000-RB dated 3rd May 2000) namely:-
1.
Short Title & Commencement:-
(i) These Regulations may be called the Foreign
Exchange Management (Transfer or Issue of Security by A Person Resident Outside
India) (Second Amendment) Regulations, 2007.
(ii) This would come into effect
from the date of its publication in the official gazette.
2. Amendment
to the Regulations:-
1. In the Foreign Exchange Management (Transfer or
Issue of Security by A Person Resident Outside India) Regulations 2000, (Notification
No. FEMA 20/2000-RB dated 3rd May, 2000), in Regulation 5, sub-regulation (1),
shall be re-numbered as clause (i) of sub-regulation (1) thereof and after clause
(i) so re-numbered, the following clause shall be inserted, namely :-
(ii)
Notwithstanding anything contained in sub-regulation (i) above, a person who is
a citizen of Bangladesh or an entity incorporated in Bangladesh may, with the
prior approval of the Foreign Investment Promotion Board of the Government of
India, purchase shares and convertible debentures of an Indian company under Foreign
Direct Investment Scheme, subject to the terms and conditions specified in Schedule
1."
2. In Schedule 1, para1 (1) shall be substituted by the following;
"A person resident outside India referred to in clauses (i) and (ii)
of sub-regulation (1) of Regulation 5, may purchase shares or convertible debentures
issued by an Indian company up to the extent and subject to the terms and conditions
set out in this Schedule."
( Salim Gangadharan )
Chief
General Manager
(i) Foot Note: The Principal Regulations were published
in the Official Gazette vide G.S.R.No. 406 (E) dated May 3, 2000 in Part II, Section
3, sub-section (i) and subsequently amended as under:
G.S.R.No. 158(E) dated
02.03.2001
G.S.R.No. 175(E) dated 13.03.2001
G.S.R.No. 182(E) dated 14.03.2001
G.S.R.No.
4(E) dated 02.01.2002
G.S.R.No. 574(E) dated 19.08.2002
G.S.R.No. 223(E)
dated 18.03.2003
G.S.R.No. 225(E) dated 18.03.2003
G.S.R.No. 558(E) dated
22.07.2003
G.S.R.No. 835(E) dated 23.10.2003
G.S.R.No. 899(E) dated 22.11.2003
G.S.R.No.
12(E) dated 07.01.2004
G.S.R.No. 278(E) dated 23.04.2004
G.S.R.No. 454(E)
dated 16.07.2004
G.S.R.No. 625(E) dated 21.09.2004
G.S.R.No. 799(E) dated
08.12.2004
G.S.R.No. 201(E) dated 01.04.2005
G.S.R.No. 202(E) dated 01.04.2005
G.S.R.No.
504(E) dated 25.07.2005
G.S.R.No. 505(E) dated 25.07.2005
G.S.R.No. 513(E)
dated 29.07.2005
G.S.R.No. 738(E) dated 22.12.2005
G.S.R.No. 29(E) dated
19.01.2006
G.S.R.No. 413(E) dated 11.07.2006
G.S.R. No. 713(E) dated
November 14, 2007
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-2008/215 · issued 19 Dec 2007. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks handling FDI inflows, Indian companies seeking FDI from Bangladesh, Bangladeshi citizens and entities investing in India), your first concrete step on “Bangladesh FDI: Prior FIPB Approval Now Mandatory” is: “Update internal FDI processing guidelines to require FIPB approval for all Bangladesh-origin investors.” (RBI issued this 19 Dec 2007).
Circular: RBI/2007-2008/215 -- Bangladesh FDI: Prior FIPB Approval Now Mandatory
Issued: 19 Dec 2007
Action required: Update internal FDI processing guidelines to require FIPB approval for all Bangladesh-origin investors.
Action required: Train AD Category-I staff on the new clause (ii) of Regulation 5 and the amended Schedule 1.
Action required: Advise customers/constituents about the prior approval requirement before initiating any FDI remittance from Bangladesh.
Action required: Maintain separate audit trails for Bangladesh FDI cases to demonstrate regulatory compliance.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3986&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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