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Mode of Payment Norms under FEMA Regulations changed by RBI

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a) The Reserve Bank of India (RBI) notified the amendment in the mode of payment norms under Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019.

b) The RBI has notified the Foreign Exchange Management (Mode of Payment and Reporting of Non- Debt Instruments) (Amendment) Regulations, 2020 whereby amendment has been made to Regulation 3.1 of the Principal Regulations. The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in a foreign currency account and/or a Special Non-Resident Rupee (SNRR) account.

c) In Regulation 3.1 of the Principal Regulations under Schedule II (Investments by Foreign Portfolio Investors) in Mode of payment, “the amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in a foreign currency account and/ or a Special Non-Resident Rupee (SNRR) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. Unless otherwise specified in these regulations or the relevant Schedules, the foreign currency account and SNRR account shall be used only and exclusively for transactions under this Schedule,” shall be substituted.

d) In Regulation 3.1 of the Principal Regulations under Schedule II (Investments by Foreign Portfolio Investors) in Remittance of sale proceeds, “The sale proceeds (net of taxes) of equity instruments and units of REITs, InViTs and the domestic mutual fund may be remitted outside India or credited to the foreign currency account or an SNRR account of the FPI,” shall be substituted.

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e) In Schedule VIII (Investment by a person resident outside India in an Investment Vehicle) under the Mode of payment, “The amount of consideration shall be paid as inward remittance from abroad through banking channels or by way of swap of shares of a Special Purpose Vehicle or out of funds held in NRE or FCNR(B) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. Further, for an FPI or FVCI, the amount of consideration may be paid out of their SNRR account for trading in units of Investment Vehicle listed or to be listed (primary issuance) on the stock exchanges in India,” shall be substituted.

f) In Schedule VIII (Investment by a person resident outside India in an Investment Vehicle) under Remittance of sale/ maturity proceeds, “the sale/ maturity proceeds (net of taxes) of the units may be remitted outside India or may be credited to the NRE or FCNR(B) or SNRR account, as applicable of the person concerned,” shall be substituted.

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