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FEM (NDI) Rules 2019 amended w.r.t. FDI in insurance & others
April 28, 2020Following Press Note 1 of 2020 which amended the Consolidated FDI Policy of 2017 with respect to the Insurance Sector to allow 100% FDI under the automatic route in Intermediaries or Insurance Intermediaries (Refer KM Legal update below), the MoF has notified this amendment in the Foreign Exchange Management (Non-Debt Instruments) Rules 2019, in Schedule I, in Para F.8 of the Table, with effect from 27 April 2020.
The following further amendments have also been made in the NDI Rules with effect from 27 April 2020 :
- In Schedule II related to the purchase or sale of equity instruments by Foreign Portfolio Investors, Para 1(a)(iii) provides that FPIs investing in breach of the prescribed limit have an option to divest their holdings within five trading days from the date of settlement of trades causing the breach. In case the FPI chooses not to divest, then the entire investment in the company by such FPI and its investor group shall be considered as investment under FDI and the FPI and its investor group shall not make further portfolio investment in the company concerned. It is now provided that the divestment of holdings by FPIs and the reclassification of FPI investment as FDI shall be subject to further conditions, if any, specified by SEBI and RBI.
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- A new Rule 7A has been inserted to separately provide for “Acquisition after renunciation of rights” that, “A person resident outside India who has acquired a right from a person resident in India who has renounced it may acquire equity instruments (other than share warrants) against the said rights as per pricing guidelines specified under rule 21 of these rules”.The extant Explanation under Rule 7 in this regard has been deleted.
- With respect to FDI in Single Brand Retail Trading under para 15.1.3 of the Table in Schedule I, in Note (3), it is clarified that :
(3) Sourcing norms shall not be applicable up to three years from commencement of the business i.e. opening of the first store or start of online retail, whichever is earlier for entities undertaking single brand retail trading of products having ‘state-of-art’ and ‘cutting-edge technology and where local sourcing is not possible.
To refer to the Foreign Exchange Management (Non-Debt Instruments) (Second Amendment) Rules, 2020, click here.
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