RBI to Address Confusion Over Overseas Investments

The Reserve Bank of India (RBI) is stepping in to clear up confusion surrounding rules for overseas investments (OI), which have left many Indians, including wealthy individuals, families, and startups, uncertain about their plans to invest abroad.

Questions like whether a resident individual can invest in an unregulated fund in Singapore or if a local startup can buy shares in a fintech firm overseas have been causing uncertainty. Additionally, concerns about whether high-net-worth individuals (HNI) can hold fixed deposits in offshore banks or if Indian companies with minority stakes in foreign companies need to navigate extra compliance measures remain unanswered.

These uncertainties have led to delays and obstacles for those looking to diversify their assets or expand their businesses internationally. In response, the RBI is set to meet with banks to address these issues. The central bank aims to provide clarity on regulations, helping individuals and companies avoid violations of the Foreign Exchange Management Act (FEMA).

Since the introduction of new regulations in 2022, ambiguities have arisen, with banks interpreting rules differently. Some remittance proposals have been put on hold amid concerns about large outflows.

According to Rutvik Sanghvi, a partner at the CA firm Rashmin Sanghvi & Associates, clarity is needed on several issues, including the definition of ‘control,’ regulations surrounding investment in unregulated funds, and the application of FEMA to foreign securities.

Overall, the RBI’s efforts aim to streamline processes and provide clear guidelines for overseas investments, easing the path for those seeking to invest internationally.