Legislation UpdatesRules & Regulations

Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2020

The Central Government makes the Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2020, to amend the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

In the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, in rule 6, in clause (a), after the third proviso, the following proviso shall be inserted, namely:-

Provided also that a Multilateral Bank or Fund, of which India is a member, shall not be treated as an entity of a particular country nor shall any country be treated as the beneficial owner of the investments of such Bank or Fund in India

In Schedule 1 of the rules,  for the Defence sector, Centre notifies that the Defence Industry subject to Industrial license under the Industries (Development and Regulation) Act, 1951 and Manufacturing of small arms and ammunition under the Arms Act, 1959, the Sectoral Cap will be 100% and Entry Route in case of Automatic up to 74% and Government route beyond 74% wherever it is likely to result in access to modern technology or for other reasons to be recorded.

Read the detailed notification, here: NOTIFICATION

Ministry of Finance

[Notification dt. 08-12-2020]

Legislation UpdatesNotifications

S.O. 3722(E)—In exercise of the powers conferred by sub-section (7) of Section 6 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Central Government hereby determines the following instruments as debt instruments, namely:—

(i) Government bonds;
(ii) corporate bonds;
(iii) all tranches of securitisation structure which are not equity tranche;
(iv) borrowings by Indian firms through loans;
(v) depository receipts whose underlying securities are debt securities.

2. Instruments specified below shall be considered as non-debt instruments, namely:-

(i) all investments in equity in incorporated entities (public, private, listed and unlisted);
(ii) capital participation in Limited Liability Partnerships (LLPs);
(iii) all instruments of investment as recognised in the FDI policy as notified from time to time;
(iv) investment in units of Alternative Investment Funds (AIFs) and Real Estate Investment Trust (REITs) and Infrastructure Investment Trusts (InVITs);
(v) investment in units of mutual funds and Exchange-Traded Fund (ETFs) which invest more than fifty per cent in equity;
(vi) the junior-most layer (i.e. equity tranche) of securitisation structure;
(vii) acquisition, sale or dealing directly in immovable property;
(viii) contribution to trusts;
(ix) depository receipts issued against equity instruments.

3. All other instruments which are not specified in paragraphs (1) and (2) above, shall be deemed as debt instruments.

Ministry of Finance

[Notification dt. 16-10-2019]