On 12 June 2026, the Ministry of Finance notified the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2026, aiming to simplify regulatory language, broaden the category of eligible investors, and strengthen oversight in sensitive investment areas, particularly those involving countries sharing land borders with India.
Key Points:
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These Rules revise the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.
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The amendment makes a key change in Rule 9, where the term “Non-Resident Indian (NRI) or Overseas Citizen of India (OCI)” has been replaced with “an individual”, widening the scope to include all persons, resident outside India.
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In Chapter V, the heading relating to investment has been modified to replace the earlier focus on NRIs/OCIs with a broader category of “individual person resident outside India including NRI or OCI”.
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Changes have also been introduced in Rule 12, where provisions relating to investment are revised to allow an individual resident outside India to purchase or sell equity instruments of a listed Indian company on a repatriation basis, subject to conditions specified in Schedule III.
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Further, Rule 13 has been amended to enable such individuals holding equity instruments to transfer them by way of sale or gift to another person resident outside India, in accordance with the rules and prescribed conditions.
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The amendment also introduces safeguards by requiring prior Government approval in Rule 12 and Rule 13 where investment or transfer results in ownership or control of a listed Indian company passing to entities or citizens of countries sharing land borders with India, or where the beneficial owner belongs to such countries.
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In Schedule II, changes have been made to clarify that the total holding of a foreign portfolio investor across schedules must remain within prescribed limits, and stricter provisions apply where investment reaches 10% or more.
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Similarly, Schedule III has been revised to provide detailed conditions for purchase and sale of equity instruments by individuals resident outside India, including limits of less than 10% for individual holdings and an overall cap of 24%.
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It further provides that any breach of these limits must be rectified within a prescribed time, failing which the investment will be treated as foreign direct investment (FDI).
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The Amended Rules also align the definition of “beneficial owner” with the Prevention of Money Laundering Act, 2002 to ensure transparency and stronger regulatory oversight.
Also Read: Understanding the differences between NRIs, OCIs and PIOs
Also Read: FEMA Amendment 2025: RBI Revises Export and Import of Currency Rules
[Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2026, published on 12-6-2026]
