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The Reserve Bank of India (RBI) has issued draft guidelines to further liberalise regulatory framework governing overseas investments with a view to promote ease of doing business. The RBI has placed on its website two documents -- draft Foreign Exchange Management (Non-debt Instruments - Overseas Investment) Rules, 2021 and draft Foreign Exchange Management (Overseas Investment) Regulations, 2021.

The Draft Foreign Exchange Management (Non-debt Instruments - Overseas Investment) Rules, 2021 has outlined the restrictions on overseas investments. As per the draft, a person resident in India is prohibited from making Overseas Direct Investment (ODI) in a foreign entity engaged in real estate activity; gambling in any form; and offering financial products linked to Indian Rupee except for products offered in an IFSC. Also, it said overseas investment will remain prohibited a foreign entity located in countries/ jurisdictions that are not Financial Action Task Force (FATF) and International Organization of Securities Commissions (IOSCO) compliant country or any other country/ jurisdiction as may be prescribed by the central government.

The other draft on Foreign Exchange Management (Overseas Investment) Regulations, 2021 proposes that an Indian entity may lend or invest in any debt instruments issued by a foreign entity subject to such loans duly backed by a loan agreement and the rate of interest shall be charged on an arm's length basis, among other things.