Foreign Exchange Management (Overseas Investment) Directions, 2022 Amended In Respect Of Investments In Overseas Funds

Earlier, as per the provisions of the Foreign Exchange Management (Overseas Investment) Directions, 2022, investment (including sponsor contribution) in units of any investment fund overseas, duly regulated by the regulator for the financial sector in the host jurisdiction, shall be considered as Overseas Portfolio Investment. Further, investments can be made in units of investment funds.

However, in view of the diverse regulatory framework governing investment funds across various jurisdictions and to provide clarity, certain amendments have been brought to the Foreign Exchange Management (Overseas Investment) Directions, 2022, vide a circular dated June 07, 2024 bearing No.: RBI/2024-25/41 A.P. (DIR Series) Circular No. 09 in the following manner:

1. Paragraph 1(ix)(e) of the said Directions has been replaced to state that investment (including sponsor contribution) in units or any other instrument (called by whatever name) issued by an investment fund overseas, duly regulated by the regulator for financial sector in the host jurisdiction shall be treated as an overseas portfolio investment. Accordingly, in jurisdictions other than IFSCs, listed Indian companies and resident individuals may make such investment. Whereas in IFSCs, an unlisted Indian entity also may make such overseas portfolio investment in units or any other instrument (called by whatever name) issued by an investment fund or vehicle, in terms of and subject to limits, as prescribed in the applicable rules. Further, ‘investment fund overseas, duly regulated’ has been widely defined to also include funds whose activities are regulated by financial sector regulator of host country or jurisdiction through a fund manager;
2. Paragraph 24(1) of the said Directions has been replaced to state that 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 (called by whatever name) issued by an investment fund or vehicle set up in an IFSC, as overseas portfolio investment. Accordingly, in addition to listed Indian companies and resident individuals, unlisted Indian entities also may make such investment in IFSC.