RBI publishes consultation on overseas investment liberalisation

The Reserve Bank of India (RBI) has introduced two consultation papers with an aim of liberalising the county’s overseas investment regulatory stance.

According to Regulatory Asia, the central bank said it wants to further liberalise the regulatory framework for overseas investment as well as promote ease of doing business by rationalising existing provisions governing overseas investment in the Foreign Exchange Management Act.

Under the current draft rules, a person who resides in India is restricted from making overseas direct investment in foreign organisations engaged in real estate activity, gambling in any way or offering financial products that are linked to the Indian Rupee except for products which are offered in an International Financial Services Centre.

The consultation underlines that overseas investment in foreign entities will remain prohibited if they are based in countries that are not compliant with the Financial Action Task Force and the International Organization of Securities Commissions.

Furthermore, the overseas investment rules put forward that Indian entities may be able to lend or invest in any debt instruments that are issued by foreign entities if such loans are backed by a loan agreement and the interest rate is charged on an ‘arm’s length’ basis.

The consultation papers are open for comment until 23 August.

Earlier this year, the RBI banned American Express Banking and Diners Club International from adding new customers, citing non-compliance with data-storage rules.

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