RBI’s new overseas investment regulations: A gamechanger for Indian investors
The Reserve Bank of India (RBI) issued a circular on 7 June, relaxing overseas investment regulations and clarifying ambiguities for wealthy Indians, business families, and startups seeking to invest in foreign securities, funds, and companies.
The new rules simplify investment and open global opportunities for Indian limited partners (LPs).
The key amendment in the circular relaxes restrictions for overseas portfolio investors (OPI). Previously, Indian LPs could only invest in “units of an investment fund".
The updated guidelines now extend permissible investments to «any other instruments,» including shares, stocks, interests in firms, Limited Liability Companies (LLCs), fixed deposits, and more. This broadened scope enables Indian investors to engage in a wider array of financial instruments overseas.
The RBI has also amended the regulation pertaining to investment funds. Previously, Indian investors could only invest in funds directly regulated by the financial sector regulator of the host country. This restriction often excluded popular investment destinations like Singapore and certain US states, where funds are regulated through their fund managers rather than directly by financial regulators.
The amendment now includes funds regulated through their managers, widening potential investment destinations. This is particularly relevant for locations like Singapore, where the Monetary Authority of Singapore regulates fund managers, and some U.S. states with similar frameworks.
Before this circular, there was considerable confusion among authorized dealer bankers (AD bankers) and Indian LPs regarding the classification of investments in offshore funds. Offshore funds are typically structured as corporate entities
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