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New Norms to Invest Overseas

Context:

Recently, The Ministry of Finance noticed new norms making it easier for domestic corporates to invest abroad, while making it tougher for loan defaulters and those facing a probe by investigative agencies to invest in overseas entities.

Relevance:

GS III: Indian Economy

Dimensions of the Article:

  1. Key Highlights of the New Rules
  2. Significance of the News rules:

Key Highlights of the New Rules

Reserve Bank of India:

  • The Reserve Bank of India (RBI) will be in charge of enforcing the Overseas Investment Rules and Regulations, which were notified under the Foreign Exchange Management Act.
  • These rules will supersede all current regulations relating to foreign investments as well as the purchase and sale of real estate outside of India.

No-Objection Certificate

  • Anyone who has a bank account that is considered a non-performing asset, is identified as a wilful defaulter by any bank, is under investigation by a financial sector regulator, the Enforcement Directorate (ED), or the Central Board of Investigation must obtain a No-Objection Certificate (NOC).
  • Additionally, without the express permission of the central bank, no Indian resident will be allowed to invest in foreign companies involved in the real estate industry, gambling of any kind, or the trading of financial goods pegged to the Indian rupee.

Sixty Day Timeline:

  • However, it may be assumed that the lenders and any relevant regulatory body or investigative agency have no objections to the proposed transaction if they fail to provide the NOC within sixty days of receiving an application.

Significance of the News rules:

  • The updated regulatory framework for foreign investment offers simplification of the current framework and has been adjusted to reflect the current dynamics of business and the economy.
  • A lot of clarity has been added to the terms “overseas direct investment” and “overseas portfolio investment,” and “many overseas investment-related activities that were previously under the approval route are now under the automatic route, considerably improving convenience of doing business.”

-Source: The Hindu


 

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October 2022
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