Government notifies new overseas investment norms, says will enhance ease of doing business
Government notifies new overseas investment norms, says will enhance ease of doing business
The government notified new norms for overseas investments by Indians on August 22, 2022 that are aimed at making it easier for domestic corporates to invest abroad, while making it tougher for loan defaulters and others being probed by investigative agencies and regulators to shift funds out of the country.
The Overseas Investment Rules and Regulations, notified under the Foreign Exchange Management Act (FEMA), will be administered by the Reserve Bank of India (RBI), and shall subsume all existing norms pertaining to overseas investments as well as acquisition and transfer of immovable property outside India.
No Indian resident shall be allowed to make investments into foreign entities that are engaged in real estate activity, gambling in any form, and dealing with financial products linked to the Indian rupee without the central bank’s specific approval.
To make it difficult for bank defaulters and fraudsters to acquire assets abroad, often as a precursor to leaving the country, the new rules mandate they secure a No Objection Certificate (NOC) from their lender, or concerned regulators and investigative agencies before making any ‘financial commitment’.
This NOC shall be mandatory for any person who has a bank account classified as a non-performing asset, or is labelled a wilful defaulter by any bank, or is under the investigation by a financial service regulator, the Enforcement Directorate (ED) or the Central Board of Investigation (CBI).
The rules, framed in consultation with the central bank, provide that if lender banks or the concerned regulatory body or investigative agency fail to furnish the NOC within 60 days of receiving an application, it may be presumed that they have no objection to the proposed transaction.
“In view of the evolving needs of businesses in India in an increasingly integrated global market, there is need of Indian corporates to be part of global value chain. The revised regulatory framework for overseas investment provides for simplification of the existing framework for overseas investment and has been aligned with the current business and economic dynamics,” the Finance Ministry said.
“Clarity on Overseas Direct Investment and Overseas Portfolio Investment has been brought in and various overseas investment related transactions that were earlier under approval route are now under automatic route, significantly enhancing Ease of Doing Business,” the ministry added.
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