What changed
RBI issued a master circular compiling all existing instructions on foreign investment in India under FEMA. It consolidated rules for FDI, portfolio investment, foreign venture capital, and investments in partnership firms. The circular included a sunset clause, making it valid only until July 1, 2012.
What it means for you
Banks must use this single reference for all foreign investment compliance, replacing earlier scattered circulars. The sunset clause means banks need to track the replacement circular after July 2012. This simplifies but also centralizes regulatory oversight for AD banks handling foreign investments.
What you must do
- Review and implement the consolidated FDI and portfolio investment guidelines from this master circular.
- Ensure all reporting for FDI, FII, and NRI investments follows the specified formats and timelines.
- Prepare for the circular's expiry on July 1, 2012, by monitoring for the updated version.
- Train staff on the unified framework for foreign investment transactions and compliance.
Who it affects
All Category-I Authorised Dealer banks, Indian companies receiving foreign investment, Foreign investors (FIIs, NRIs, venture capital investors), Partnership firms and proprietary concerns with non-resident investment
What is the legal basis for this master circular?
It is issued under Section 6(3) of FEMA, 1999, read with Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended.
Does this circular cover investments in partnership firms?
Yes, Part II of the circular covers investment in partnership firms and proprietary concerns, regulated under Section 2(h) of Section 47 of FEMA read with Notification No. FEMA 24/2000-RB.
When does this master circular expire?
It has a sunset clause and stands withdrawn on July 1, 2012, to be replaced by an updated version.