Overseas Investment Rules- Relevance for UPSC Exam
General Studies III- Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
In News
The Finance Ministry has released the Rules for Foreign Exchange Management (Overseas Investment Rules), 2022 subsuming extant regulations for Overseas Investments and Acquisition and Transfer of Immovable Property outside India Regulations, 2015.
The news Overseas Investment Rules
- With an eye on wilful defaulters, the new rules says that -Any Indian resident will have to seek an no objection certificate before making any overseas financial commitment:
- Who has an account appearing as a non-performing asset
- Or is classified as a wilful defaulter by any bank
- Or is under investigation by a financial service regulator or by investigative agencies in India.
Changes in overseas investment norms
- Any resident in India acquiring equity capital in a foreign entity or overseas direct investment (ODI), will have to submit an Annual Performance Report (APR) for each foreign entity, every year by December 31.
- No such reporting shall be required where a person resident in India is holding less than 10% of the equity capital without control in the foreign entity.
- No other financial commitment other than equity capital or a foreign entity is under liquidation.
Ceiling on investment
- Any resident individual can make ODI by way of investment in equity capital or overseas portfolio investment (OPI) subject to the overall ceiling under the Liberalized Remittance Scheme (LRS) of the Reserve Bank.
- Currently, the LRS permits $2,50,000 outward investment by an individual in a year.
- These norms make it easier for domestic corporates to invest abroad.
Prohibitions
- Any Indian resident, who has been classified as a willful defaulter or is under investigation by the CBI, the ED or the Serious Frauds Investigation Office (SFIO), will have to obtain a no-objection certificate (NOC).
- NOC can be obtained from his or her bank, regulatory body or investigative agency before making any overseas “financial commitment” or disinvestment of overseas assets.
- The rules also provide that if lenders, the concerned regulatory body or investigative agency fail to furnish the NOC within 60 days of receiving an application, it may be presumed that they have no objection to the proposed transaction.
- Additionally, the new rules also prohibit Indian residents from making investments into foreign entities that are engaged in real estate activity, gambling in any form, and dealing with financial products linked to the Indian rupee without the specific approval of the RBI.
FAQs
What does change in Overseas Investment Rules says about investment in foreign capital?
Any resident in India acquiring equity capital in a foreign entity or overseas direct investment (ODI), will have to submit an Annual Performance Report (APR) for each foreign entity, every year by December 31.
What does LRS stands for?
LRS stands for Liberalized Remittance Scheme (LRS).
What ios the LRS limit for outward investment by an individual in a year?
The LRS permits $2,50,000 outward investment by an individual in a year.