What changed
RBI issued Master Circular No.13/2010-11 on July 1, 2010, compiling all existing instructions on foreign investment in India under FEMA. It covered both equity investments and investments in partnership firms or proprietary concerns. The circular included a sunset clause, meaning it would automatically expire on July 1, 2011, and be replaced by an updated version.
What it means for you
For AD Category-I banks, this circular served as a single reference document for foreign investment compliance, reducing the need to track multiple underlying notifications. Banks had to ensure their processes aligned with the consolidated rules, and they needed to prepare for the annual update cycle. The sunset clause signaled RBI's intent to regularly refresh the framework.
What you must do
- Review your bank's foreign investment processing procedures against this Master Circular to ensure compliance with all consolidated FEMA provisions.
- Prepare for the circular's expiry on July 1, 2011, by monitoring RBI for the updated version and planning internal training updates.
- Ensure your AD Category-I authorization covers all investment types mentioned, including partnership firms and proprietary concerns.
- Maintain records of underlying notifications referenced in the circular's appendix for audit readiness.
Who it affects
All Category-I Authorised Dealer banks, Banks handling foreign investment transactions in India, Compliance teams dealing with FEMA regulations
What is the sunset clause in this Master Circular?
The circular included a sunset clause stating it would stand withdrawn on July 1, 2011, and be replaced by an updated Master Circular on the same subject.
Does this circular cover investments in partnership firms?
Yes, the circular covers investment in capital of partnership firms or proprietary concerns, regulated under FEMA Notification No. FEMA 24/2000-RB.
Which FEMA section governs foreign investment as per this circular?
Foreign investment is governed by sub-section (3) of Section 6 of the Foreign Exchange Management Act, 1999, read with Notification No. FEMA 20/2000-RB.