The Reserve Bank of India (RBI) has relaxed several rules governing overseas investments. Particularly in the area of Overseas Portfolio Investments (OPIs).
The RBI on Friday updated the Foreign Exchange Management (Overseas Investment) Rules, 2022. Which includes provisions related to OPI and relaxed several restrictions.
Existing Paragraph 24(1) of FEM (OI) Directions, 2022 is replaced with the following:
“A person resident in India, being an Indian entity or a resident individual, may make investment (including sponsor contribution) in units or any other instrument (by whatever name called) issued by an investment fund or vehicle set up in an IFSC, as OPI. Accordingly, in addition to listed Indian companies and resident individuals, unlisted Indian entities also may make such investment in IFSC.” – RBI
The updates, released on June 7, 2024, primarily focus on easing restrictions for certain types of investors, such as allowing resident individuals to invest in overseas direct investments (ODI) and permitting alternative investment funds (AIFs) to invest in overseas firms.
It specify that resident individuals are allowed to make Overseas Portfolio Investment (OPI) in units or other instruments issued by investment funds or vehicles set up in International Financial Services Center (IFSC).
Similarly, the update now allows unlisted Indian entities to make OPI in units or other instruments issued by investment funds or vehicles in IFSC.
Indian Limited Partners (LPs) can now invest in any instrument issued by overseas funds, not just units. This provides more flexibility and options for Indian investors.
Pros of these relaxations are expected to:
- Increase overseas investments: By easing restrictions and providing more options, the RBI aims to encourage more participation in overseas markets.
- More innovation: The flexibility in fund establishment may give lead to more innovative investment structures and strategies.
- More vibrant and enhance the investment landscape: The relaxation may contribute to a more vibrant and competitive investment landscape in India.
Conclusion: RBI recent updates on OPI focused to make it easier and more attractive for Indian residents to invest in foreign securities. The changes open gateway for wider range of overseas investment opportunities for both individual and institutional investors in India.