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UPSC NEW NORMS TO INVEST OVERSEAS - English

NEW NORMS TO INVEST OVERSEAS

Why in News?

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.

Highlights of the New Rules

Administered by RBI: The Overseas Investment Rules and Regulations, notified under the Foreign Exchange Management Act, will be administered by the Reserve Bank of India (RBI), and shall subsume all existing norms pertaining to overseas investments as well as the acquisition and transfer of immovable property outside India.

No Go Sectors: A No-Objection Certificate (NOC) will 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 investigation by a financial service regulator, the Enforcement Directorate (ED) or the Central Board of Investigation (CBI).

Further, no Indian resident will be permitted to make investments in foreign entities that are engaged in real estate business, gambling in any form and dealing with financial products linked to the Indian rupee without the central bank’s specific approval.

Sixty Day Timeline: However, if the lenders or the relevant regulatory body or investigative agency fail to furnish the NOC within sixty days of receiving an application, it may be presumed that they have no objection to the proposed transaction.

Significance: 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

Clarity on overseas direct investment and overseas portfolio investment has been brought in and “various overseas investment-related transactions that were earlier under the approval route are now under automatic route, significantly enhancing ease of doing business.

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