INDIA: SEBI Publish Master Direction – Foreign Investment in India

Monday January 8 2018

In 2016, the Reserve Bank of India (RBI) started issuing Master Directions on all regulatory matters. The Master Directions consolidate instructions on rules and regulations framed by the Reserve Bank under various Acts including banking issues and foreign exchange transactions. The process of issuing Master Directions involves issuing one Master Direction for each subject matter covering all instructions on that subject. Any change in the rules, regulation or policy is communicated during the year by way of circulars/press releases.

The Master Directions are updated simultaneously whenever there is a change in the rules/regulations or there is a change in the policy. All the changes are reflected in the Master Directions available on the RBI website along with the dates on which changes are made. Explanations of rules and regulations are issued by way of Frequently Asked Questions (FAQs) after issue of the Master Directions in easy to understand language wherever necessary.

On 4th January 2018, the Reserve Bank of India published Master Direction – Foreign Investment in India. Foreign Investment in India is regulated in terms of clause (b) sub-section 3 of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (FEMA) read with Foreign Exchange Management (Transfer or Issue of a Security by a Person resident Outside India) Regulations, 2017.

The Master Direction includes regulations on:

• Entry Routes and permitted Sectors;
• Permitted Investments by persons resident outside India;
• Transfer of capital instruments of an Indian company by or to a person resident outside India;
• Pricing guidelines;
• Downstream Investment;
• Taxes and remittance of sale proceeds;

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