What changed
RBI formalized DIPP's 2009 and 2012 press notes into FEMA regulations, effective from June 7, 2013. The framework defines ownership/control, calculation methods for total foreign investment, and downstream investment rules. Investments made before February 13, 2009 are grandfathered; others must conform or be reported within 90 days.
What it means for you
Banks must ensure clients comply with the new FDI calculation and downstream investment rules. Non-conforming investments made after February 13, 2009 need to be reported to RBI within 90 days for possible regularization. This impacts sectors with foreign investment caps and requires careful monitoring of ownership structures.
What you must do
- Review client investments made after February 13, 2009 for compliance with the new guidelines.
- Report any non-conforming investments to the concerned RBI Regional Office within 90 days from July 4, 2013.
- Advise customers on the new definitions of ownership, control, and total foreign investment calculation.
- Ensure downstream investments by Indian companies not owned/controlled by residents follow the prescribed rules.
Who it affects
All Category-I Authorised Dealer banks, Indian companies receiving foreign investment, Non-resident investors in sectors with FDI caps, Companies making downstream investments
What is the deadline for reporting non-conforming investments?
Indian companies must report such investments through an AD Category-I bank to the RBI Regional Office within 90 days from July 4, 2013.
Are investments made before February 13, 2009 affected?
No, those investments are grandfathered and do not require modification to conform to the new guidelines.
What does 'total foreign investment' include?
It includes both direct and indirect foreign investment in Indian companies, as defined in the guidelines.