The Citizenship (Amendment) Act, 2015 and major overhauls to galvanize expat investments (Part 5)

Further to our Part IV, this post seeks to examine the changes brought about by RBI in the Foreign Exchange Management (Remittance of Assets) Regulations, 2016, the Foreign Exchange Management (Deposit) Regulations, 2016 and the new investment option of ‘masala bonds’ made available to global investors to invest in India.

6. Foreign Exchange Management (Remittance of Assets) Regulations, 2016

Vide notification dated 1 April 2016, the RBI has notified the certain regulations in respect of remittance outside India by a person whether resident in India or not, of assets in India:

  • Save as otherwise provided in the FEMA Act, 1999 or rules or regulations made or issued thereunder, no person, whether resident in India or not, shall make remittance of any asset held in India by him or by any other person.
  • An NRI or a PIO may remit through an authorized dealer an amount, not exceeding USD 1,000,000 (US Dollar One million only) per financial year.
  • An NRI or PIO who desires to make remittances of assets exceeding USD 1,000,000 (US Dollar One million only) per financial year, out of the balances held in NRO accounts / sale proceeds of assets / the assets acquired by way of inheritance / legacy, may apply to the RBI for permission towards the same.
  • A branch or office established in India by a person resident outside India may, for making remittance of assets on closure or remittance of its winding up proceeds, apply to the authorized dealer concerned.

7. Foreign Exchange Management (Deposit) Regulation, 2016 (“Deposit Regulations”)

Vide the Deposit Regulations dated 1 April 2016, RBI has notified regulations relating to deposits between a person resident in India and a person resident outside India.

The Deposit Regulations has notified that, Indian companies can accept deposits from NRIs or PIOs by issue of a ‘Commercial Paper’ subject to terms and conditions specified in the Deposit Regulations. Further, an Indian proprietorship concern / firm or a company (including Non-Banking Finance Company) registered with the RBI can accept deposits from NRIs or PIOs on non-repatriation basis subject to the terms and conditions specified in Schedule 7 of the Deposit Regulations.

The Deposit Regulations also made changes in the provisions related to acceptance of deposits by Indian companies from a person resident outside India for nomination as director. Vide circular dated 13 April 2016, it states that, keeping deposits with an Indian company by person resident outside India, in accordance with Section 160 of the Companies Act, 2013, is a current account (payment) transaction and does not require any approval from the RBI. All refunds of such deposits, arising in the event of selection of the person as director or getting more than 25% (twenty-five percent) votes, shall be treated similarly.

8. Rupee Denominated Bonds

Issued within the framework of the External Commercial Borrowings Policy, Rupee denominated bonds or offshore rupee bonds or masala bonds, is one of the various investment options now available to global investors to invest in India. These bonds are rupee-linked and issued in markets outside India.

Vide the Fourth Bi-monthly Monetary Policy Statement, 2015-16, RBI announced its decision to permit Indian corporates to issue rupee denominated bonds with a minimum maturity of 5 (five) years at overseas locations within the ceiling of foreign investment permitted in corporate debt without any restriction on the end use of funds except a small negative list. Parallelly, vide A.P. (DIR Series) Circular No.17 dated 29 September 2015, RBI notified the broad contours of the framework stating that any investor from a Financial Action Task Force (FATF) compliant jurisdiction would be a recognized investor towards the same.

However, to make this investment option more attractive to NRI investors, the Finance Act 2017 which came into effect from 1 April 2017 after receiving the presidential assent on 31 March 2017 notified certain tax benefits to investors and enumerated that a transfer made outside India of a rupee denominated bond of Indian company issued outside India, by a non-resident to another non-resident, shall not be regarded as a transfer for the purpose of levy of capital gains tax.

Further, vide A.P. (DIR Series) Circular No.60 dated 13 April 2016, RBI relaxed certain guidelines such as reducing the minimum maturity period to 3 (three) years in order to align with the maturity prescription regarding foreign investment in corporate bonds through the Foreign Portfolio Investment route. However, in order to have consistency regarding eligibility of foreign investors in corporate debt, the criteria for investors and location for issuance of these bonds have been made stringent.


The next post seeks to examine the amendments brought about by RBI to permit NRIs to subscribe to the National Pension System and the clarification issued by Employees Provident Fund Organization towards provident fund contributions to be made by certain establishments towards ‘International Workers’. To read other articles in this series click here.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Create a website or blog at

Up ↑

%d bloggers like this: