FDI: RBI defines 'group company' for FEMA compliance
Current · Source: Reserve Bank of India · RBI/2013-14/356 · issued 01 Nov 2013 · ~2 min read
Quick answerRBI has formally defined 'group company' under FEMA as enterprises where one holds 26%+ voting rights or appoints >50% of board directors. This clarifies FDI eligibility and compliance for AD banks processing investments.
The rule, in the simplest words
A 'group company' is two or more businesses where one controls 26% or more voting rights in the other (26% means how much voting power a company has).
Or where one can appoint more than 50% of the board members in the other business (50% means more than half of the board).
This definition helps banks decide if a foreign investor is a group company for FDI (foreign direct investment) rules.
Banks must check these two numbers when they process FDI transactions and update their compliance checklists.
How it plays out — a real example
A compliance officer at an AD Category‑I bank in Mumbai reviews a foreign investor’s application. She sees the investor’s holding company owns 28% voting rights in the target Indian firm, so she classifies it as a group company and ensures the FDI paperwork follows the new 26% rule.
What changed
RBI incorporated a formal definition of 'group company' into the FEMA regulations via Notification FEMA.292/2013-RB. The definition aligns with DIPP's Press Note No. 2 (2013 Series) and sets two thresholds: 26% or more voting rights, or appointment of more than 50% of board members in another enterprise.
What it means for you
Banks must now apply this clear, quantitative test when determining if an investor qualifies as a 'group company' for FDI purposes. This reduces ambiguity in compliance checks and ensures uniform treatment across AD Category-I banks. It also impacts how downstream investments and indirect ownership structures are evaluated under FEMA.
What you must do
Update internal FEMA compliance checklists to include the 26% voting rights and >50% board appointment thresholds for group company determination.
Train AD bank staff handling FDI remittances and reporting on the new definition and its application.
Advise customers/constituents about the definition when they seek to route investments through group entities.
Ensure all FDI-related filings (e.g., Form FC-GPR) correctly reflect group company status where applicable.
Who it affects
AD Category-I banks processing FDI transactions, Foreign investors and their Indian subsidiaries, Compliance and legal teams handling FEMA reporting
❓ Common questions
What is the exact definition of 'group company' under this circular?
Two or more enterprises where one directly or indirectly holds 26% or more voting rights in the other, or can appoint more than 50% of the other's board of directors.
Does this definition apply to all FDI transactions?
Yes, it applies to investments under the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, as amended.
When did this definition become effective?
The amendment was notified via FEMA.292/2013-RB dated October 4, 2013, and published in the Gazette on October 11, 2013.
📜 Read the original circular — full text as issued by RBI
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/356 · issued 01 Nov 2013. The plain-English explanation above is BankPulse’s own independent summary.
Train AD bank staff handling FDI remittances and reporting on the new definition and its application.
📜 Compliance
Update internal FEMA compliance checklists to include the 26% voting rights and >50% board appointment thresholds for group company determination.
Advise customers/constituents about the definition when they seek to route investments through group entities.
Ensure all FDI-related filings (e.g., Form FC-GPR) correctly reflect group company status where applicable.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks processing FDI transactions, Foreign investors and their Indian subsidiaries, Compliance and legal teams handling FEMA reporting), your first concrete step on “FDI: RBI defines 'group company' for FEMA compliance” is: “Update internal FEMA compliance checklists to include the 26% voting rights and >50% board appointment thresholds for group company determination.” (RBI issued this 01 Nov 2013).
Action required: Update internal FEMA compliance checklists to include the 26% voting rights and >50% board appointment thresholds for group company determination.
Action required: Train AD bank staff handling FDI remittances and reporting on the new definition and its application.
Action required: Advise customers/constituents about the definition when they seek to route investments through group entities.
Action required: Ensure all FDI-related filings (e.g., Form FC-GPR) correctly reflect group company status where applicable.
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.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 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=8551&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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