Amendments to the Foreign Exchange Regulations

The Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2020 notified on and effective from July 27, 2020 (‘Amendment Rules’) have introduced the following key changes to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (‘NDI Rules’): (i) the Amendment Rules empower the RBI to administer and interpret the NDI Rules, as well as to issue directions, circulars, instructions, clarifications for its effective implementation. Further, the RBI will no longer be required to consult with the Central Government when considering applications for the provision of any special approvals under the NDI Rules; and (ii) the NDI Rules previously treated overseas citizens of India (‘OCIs’) on par with non-resident Indians, permitting both categories of persons to invest up to 100% in the air transport services sector, under the automatic route. The Amendment Rules revoke such permission for OCIs to invest in the air transport services sector under the automatic route. This amendment is in line with Press Note 2 of 2020 issued by the Department of Promotion for Industry and Internal Trade (‘DPIIT’) dated March 19, 2020, as summarized here.