RBI Proposes Simpler FDI Rules To Streamline Foreign Investment Framework

New Delhi, Jul 22 (KNN) The Reserve Bank of India (RBI) on Tuesday released draft ‘Foreign Exchange Management (Foreign Investment) Rules, 2026’, proposing a simplified and principle-based framework to govern foreign direct investment (FDI) in India. 

The central bank has invited comments from stakeholders by August 31.

The draft rules aim to replace the existing Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, in line with the Union Budget 2026–27 announcement of a comprehensive review of the foreign investment regime. 

The proposed framework seeks to rationalise provisions, harmonise definitions and create a clearer regulatory structure to reduce complexity.

According to the RBI, the new rules are designed to align with evolving business practices and the government’s FDI policy while improving regulatory clarity and consistency.

Key Proposed Changes

The draft introduces several changes to streamline investment processes and enhance flexibility. These include adopting accounting-based standards for equity instruments, expanding capital structuring options such as special purpose vehicle (SPV) equity swaps and direct overseas listings, and broadening the classification of equity instruments.

The framework also proposes redefining ‘control’ by introducing a 10 per cent voting rights threshold, under which an investor may be deemed to have control if such rights are held individually or collectively. It also formalises the concept of foreign-controlled entities to improve monitoring of downstream investments.

Ease of Doing Business Focus

The RBI said the proposals aim to reduce compliance burden through streamlined procedures and a more transparent regulatory environment. 

The draft also seeks to clearly separate procedural provisions under FEMA from policy and sector-specific requirements, enabling quicker policy updates.

In addition, the ceiling for repatriable gifts is proposed to be raised to USD 2,50,000—aligned with the Liberalised Remittance Scheme limit—from the current USD 50,000, with such transfers restricted to close relatives.

Consultation and Next Steps

The draft rules have been prepared following a review by a government-appointed committee and consultations with relevant stakeholders. The RBI said the framework will be finalised after incorporating public feedback.

Foreign investment in India is currently governed by the 2019 NDI Rules, and the proposed overhaul is aimed at making the regulatory system more contemporary, investor-friendly and adaptable to changing economic priorities.

(KNN Bureau)