RBI aims to simplify foreign investment rules, seeks comments by August 31 | Today’s news

Mumbai: Aiming to reduce compliance burdens and make it easier for foreign investors to do business in India, the Reserve Bank of India (RBI) on Tuesday issued draft rules to simplify the country’s foreign investment regulations and align them with the government’s FDI (FDI policy).

The rules, open for public comment till August 31, follow the 2026-27 budget call for revision of non-debt instrument (NDI) rules to modernize India’s foreign investment framework, the RBI said.

One of the biggest proposed changes is the clear separation of the government’s foreign direct investment policy from the operational provisions of the Foreign Exchange Management Act (Fema).

Under the proposal, procedural provisions remain under Fema, while sectoral caps and entry routes will move to the government’s FDI policy. RBI will manage operational matters such as payment regimes and reporting through regulations and circulars.

We build on measures

The changes follow steps taken last month when the RBI and the finance ministry extended the Portfolio Investment Scheme (PIS) to individuals resident outside India, raising the investment cap for individuals resident outside India (PROI) under the scheme to 10% of the company’s paid-up capital from the existing 5%, while the aggregate limit for all such investors was raised to 20% from 1%. In order for the changes to be implemented, the Department of Economic Affairs informed Fr Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2026.

The rules will be administered by the RBI, while the interpretation of foreign investment policy will remain with the Department of Promotion of Industry and Internal Trade (DPIIT). The RBI said the move will provide clear delineation of Fema’s procedural provisions from policy and sectoral requirements, improve regulatory coherence and facilitate timely policy changes.

The proposal also expands the range of eligible entities in which investments have been made. Apart from companies and limited liability companies (LLPs), it expressly includes investment vehicles regulated by the Securities and Exchange Board of India such as Real Estate Investment Trusts (Reits), Infrastructure Investment Trusts (InvITs), Alternative Investment Funds (AIFs), Venture Capital Funds, Mutual Funds, Exchange Traded Funds (ETFs), Partnership Firms and Proprietary Concerns registered under applicable national laws.

Consolidation regimes

The proposal further consolidates the various permissible modes through which a non-Indian resident or a foreign-controlled entity can invest or raise capital. These include issue subscriptions, purchases, pledges, certificates of deposit, non-resident (NRI) and Overseas Citizens of India (OCI) investments in the National Pension Scheme and foreign investments through international exchanges, subject to conditions.

The proposed framework also establishes common conditions for foreign investment.

For listed companies, prices will be governed by Sebi regulations and for companies listed on international exchanges, pricing norms will be governed by the rules, while all other transactions will be based on internationally accepted arm’s length valuation methodology certified by a Chartered Accountant, Merchant Banker or Cost Accountant.

This step will make use of existing on-board systems NRI and OCI investors are reducing compliance requirements and attracting a wider pool of relatively stable foreign retail investors, the finance ministry said.