Powered by: Motilal Oswal
2024-08-17 09:08:04 am | Source: IANS
Government simplifies FDI rules to help Indian firms expand via mergers, acquisitions

 The Finance Ministry on Friday issued a notification amending the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, to simplify FDI rules for enabling easier cross-border share swaps between Indian and foreign companies, as announced in the Budget 2024-25. 

This will facilitate the global expansion of Indian companies through mergers, acquisitions, and other strategic initiatives, enabling them to reach new markets and grow their presence worldwide, said a Finance Ministry statement.

“In pursuance of the Union Budget 2024-25 announcement made by Union Minister for Finance and Corporate Affairs Nirmala Sitharaman to simplify rules and regulations for Foreign Direct Investment and Overseas Investment, as one of the initiatives, the Department of Economic Affairs (DEA), Ministry of Finance, has amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, vide notification dated 16.08.2024,” the official statement said.

The amendments aim to simplify cross-border share swaps and provide for the issue or transfer of Indian company equity instruments in exchange for foreign company equity instruments.

Another key change brings further clarity on the treatment of downstream investments made by Overseas Citizen of India (OCI)-owned entities on a non-repatriation basis, aligning it with the treatment of Non-Resident Indian (NRI)-owned entities, the statement explained.

The amendments will also enable Foreign Direct Investment (FDI) in White Label ATMs to boost financial inclusion nationwide. 

ATMs set up, owned and operated by non-banks are called White Label ATMs (WLAs). Non-bank ATM operators are authorised by the Reserve Bank of India (RBI). For a customer, using a WLA is just like using an ATM of any bank. The rationale to allow non-bank entities to set up WLAs is to increase the geographical spread of ATMs for enhanced customer service, especially in the semi-urban and rural areas.

The other changes that have been introduced with the amendments are:

* Standardising the definition of 'control' to ensure consistency with other Acts and laws

* Harmonising the definition of 'startup company' with the Government of India's notification G.S.R. 127 (E) dated February 19, 2019, issued by the Department for Promotion of Industry and Internal Trade

These amendments underscore the government's commitment to creating a foreign investor-friendly climate, with continued measures to simplify rules and promote 'Ease of Doing Business', the statement added.

Disclaimer: The content of this article is for informational purposes only and should not be considered financial or investment advice. Investments in financial markets are subject to market risks, and past performance is not indicative of future results. Readers are strongly advised to consult a licensed financial expert or advisor for tailored advice before making any investment decisions. The data and information presented in this article may not be accurate, comprehensive, or up-to-date. Readers should not rely solely on the content of this article for any current or future financial references. To Read Complete Disclaimer Click Here