In order to promote ease of doing business, the Finance Ministry has recently notified the consolidated rules for overseas investment by Indian entities. The Foreign Exchange Management (Overseas Investment) Rules, 2022 will subsume extant regulations pertaining to Overseas Investments and Acquisition and Transfer of Immovable Property Outside India Regulations, 2015.

The Indian government and the Reserve Bank of India (RBI) have jointly issued a bunch of amendments to regulations governing investments by Indians overseas. These include both direct investment and portfolio investment. The rules aim to allow easier investment by Indian-owned foreign companies in Indian businesses, which in the past would be condemned as round tripping.

The reason, according to the Finance Ministry, is that Indians are getting into global supply chains and thus two-way investments need to be eased.

In an interview with CNBC-TV18, Nandish Vyas, Senior Partner at AZB & Partners and G Padmanabhan, Former ED of RBI discussed the order and how it is going to make investments in abroad easier.

Also Read: Govt issues consolidated overseas investment rules to promote ease of doing business

"Earlier, RBI approval was needed by any entity for investment abroad. Now, a no-objection certificate (NOC) is needed from a relevant agency for investment abroad. If there is any delay, it is deemed to have been given," Vijay said.

On matters such as sale and write-off where as a practical matter earlier, an RBI approval was needed when any entity which was under investigation needed to make overseas investment or a divestment for that matter. Now, all one needs to do is a NOC from that concerned investigation agency.

Meanwhile, Padmanabhan said that some of the existing rules have been cleaned up rather than getting into new rules and restructuring has also been put under the automatic route.

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Talking about other sectors that can invest in, Vyas said that a couple of other areas where there are liberalisations are education and hospitals because now Indian trusts which run education; basically which runs schools and colleges or which run hospitals are allowed to invest overseas.

It's important to note here that the rules have included overseas investment in International Financial Services Centre (IFSC) by person resident in India. A person resident in India may make overseas investment in an IFSC in India within the limits, a gazette notification issued by the finance ministry said.

A resident individual may make Overseas Direct Investment (ODI) in a foreign entity, including an entity engaged in financial services activity, (except in banking and insurance), in IFSC, if such entity does not have a subsidiary or step down subsidiary outside IFSC where the resident individual has control in the foreign entity.

(with inputs from PTI)

For the entire discussion, watch the accompanying video

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(Edited by : Anshul)