Reserve Bank of India amends FEMA non-debt investment payment rules and treats rupee vostro accounts as banking channels

The Reserve Bank of India issued amendments to its Foreign Exchange Management rules on the mode of payment and remittance of proceeds for non-debt instruments, updating payment and repatriation routes across several inbound investment categories and clarifying that “banking channels” include rupee vostro accounts, including Special Rupee Vostro Accounts. For non-resident purchases or sales of equity instruments in Indian companies, consideration may be paid by inward remittance or from funds in repatriable foreign currency or rupee accounts, with the “amount of consideration” expressly including set-off against funds payable by the Indian company and swaps of equity instruments or equity capital. Equity instruments must be issued within 60 days of receipt of consideration, with refunds required within 15 days after the 60-day period if issuance does not occur. For Foreign Portfolio Investors and Foreign Venture Capital Investors, payment and sale or maturity proceeds may be routed through a foreign currency account and or a Special Non-Resident Rupee (SNRR) account, with the foreign currency account to be used only and exclusively for transactions under the relevant schedule unless otherwise specified. The amendments also update payment and proceeds rules for investment in limited liability partnerships, investment by non-residents into investment vehicles including via swap of shares of a special purpose vehicle, and investment in Indian Depository Receipts by Non-Resident Indians or Overseas Citizens of India and by FPIs. For Indian start-up companies issuing convertible notes to non-residents, consideration may be received by inward remittance or by debit to any repatriable foreign currency or rupee account, with repayment or sale proceeds permitted to be remitted or credited to such accounts. The amendments enter into force from the date of publication in the Official Gazette.