RBI Regularises Partly Paid Units Issued by AIFs to Foreign Investors
Current · Source: Reserve Bank of India · RBI/2024-25/36 · issued 21 May 2024 · ~2 min read
Quick answerRBI has regularised past issuances of partly paid units by Alternative Investment Funds (AIFs) to foreign investors, allowing compounding under FEMA. AD banks must ensure reporting via FIRMS before approaching RBI for compounding.
The rule, in the simplest words
AD banks must report partly paid unit issuances by AIFs to foreign investors on the FIRMS portal.
AD banks must issue conditional acknowledgements for such reports before AIFs approach RBI for compounding.
AIFs must report past partly paid unit issuances to foreign investors on the FIRMS portal immediately.
AIFs must get conditional acknowledgements from AD banks before approaching RBI for compounding.
How it plays out — a real example
Rahul, a forex & trade-finance officer in Indore, helps his client, a foreign investor, regularise partly paid units issued by an Alternative Investment Fund. Rahul ensures that the necessary reporting is done on the FIRMS portal and conditional acknowledgements are issued before the AIF approaches RBI for compounding. This helps reduce legal uncertainty and ensures a smooth resolution process for the client.
What changed
RBI has decided to regularise issuances of partly paid units by AIFs to persons resident outside India that occurred before the March 2024 amendment to the Non-debt Instruments Rules. AD banks must now ensure these issuances are reported on the FIRMS portal and conditional acknowledgements issued before the AIF can approach RBI for compounding.
What it means for you
This circular provides a clear path for AIFs to regularise past non-compliant issuances of partly paid units to foreign investors, reducing legal uncertainty. AD banks play a key gatekeeping role by verifying reporting compliance before RBI compounding, which may increase administrative workload but also offers a structured resolution mechanism.
What you must do
Advise AIF clients to report past partly paid unit issuances to foreign investors on the FIRMS portal immediately.
Ensure conditional acknowledgements are issued for such reports before the AIF approaches RBI for compounding.
Bring this circular to the notice of all relevant customers and constituents dealing with AIFs and foreign investments.
Review internal processes to handle FIRMS reporting and compounding requests efficiently.
Who it affects
Authorised Dealer Category-I banks, Alternative Investment Funds (AIFs), Foreign investors in AIFs, Compliance and legal teams handling FEMA matters
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What does 'regularise through compounding' mean for AIFs?
It means AIFs that issued partly paid units to foreign investors before the March 2024 rule change can now apply to RBI for compounding, which involves paying a penalty to regularise the violation, instead of facing stricter enforcement.
What is the role of AD banks in this process?
AD banks must ensure that the AIF has completed reporting of the issuance on the FIRMS portal and obtained a conditional acknowledgement before the AIF can approach RBI for compounding. Banks also need to inform their customers about this circular.
Does this circular apply to all investment vehicles or only AIFs?
The circular specifically mentions Alternative Investment Funds (AIFs) in the context of regularising past issuances. The enabling amendment covers investment vehicles generally, but the compounding route is explicitly for AIFs.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
📜 Read the original circular — full text as issued by RBI
RBI/2024-25/36
A.P. (DIR Series) Circular No. 7
May 21, 2024
To
All Authorised Dealer Category – I banks
Madam / Sir
Issuance of partly paid units to persons resident outside India by investment vehicles under Foreign Exchange Management (Non-debt Instruments) Rules, 2019
Attention of Authorised Dealer (AD) Category - I banks is invited to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, notified by the Central Government on October 17, 2019, which have been amended through the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2024 vide S.O. 1361(E), dated March 14, 2024, enabling issuance of partly paid units to persons resident outside India by investment vehicles.
2. In this regard, it has been decided to regularise the issuances of partly paid units by Alternative Investment Funds to persons resident outside India prior to the said amendment through compounding under Foreign Exchange Management Act, 1999. However, before approaching the Reserve Bank for compounding, AD Category-I banks may ensure that the necessary administrative action, including the reporting of such issuances by Alternative Investment Funds to the Reserve Bank, through Foreign Investment Reporting and Management System (FIRMS) Portal and issuing of conditional acknowledgements for such reporting, is completed.
3. AD Category-I banks may bring the contents of this circular to the notice of their customers / constituents concerned.
4. 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
(Dr. Aditya Gaiha)
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2024-25/36 · issued 21 May 2024. The plain-English explanation above is BankPulse’s own independent summary.
Advise AIF clients to report past partly paid unit issuances to foreign investors on the FIRMS portal immediately.
📜 Compliance
Ensure conditional acknowledgements are issued for such reports before the AIF approaches RBI for compounding.
Bring this circular to the notice of all relevant customers and constituents dealing with AIFs and foreign investments.
Review internal processes to handle FIRMS reporting and compounding requests efficiently.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (Authorised Dealer Category-I banks, Alternative Investment Funds (AIFs), Foreign investors in AIFs, Compliance and legal teams handling FEMA matters), your first concrete step on “RBI Regularises Partly Paid Units Issued by AIFs to Foreign Investors” is: “Advise AIF clients to report past partly paid unit issuances to foreign investors on the FIRMS portal immediately.” (RBI issued this 21 May 2024).
Circular: RBI/2024-25/36 -- RBI Regularises Partly Paid Units Issued by AIFs to Foreign Investors
Issued: 21 May 2024
Action required: Advise AIF clients to report past partly paid unit issuances to foreign investors on the FIRMS portal immediately.
Action required: Ensure conditional acknowledgements are issued for such reports before the AIF approaches RBI for compounding.
Action required: Bring this circular to the notice of all relevant customers and constituents dealing with AIFs and foreign investments.
Action required: Review internal processes to handle FIRMS reporting and compounding requests efficiently.
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=12686&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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