The Reserve Bank of India (RBI) plays a pivotal role in regulating India’s financial markets. On October 16, 2023, RBI introduced the “Foreign Exchange Management (Debt Instruments) (Second Amendment) Regulations, 2023.” These amendments mark an essential development in the landscape of foreign exchange management.
Amendment to Schedule 1
1. Introduction of Sub-paragraph E
A new sub-paragraph, labeled “E,” was introduced after sub-paragraph D in paragraph 1 of Schedule 1. This sub-paragraph grants permission to persons resident outside India who maintain a rupee account, as per regulation 7(1) of the Foreign Exchange Management (Deposit) Regulations, 2016. It allows them to purchase or sell dated Government Securities and treasury bills, subject to terms and conditions specified by the Reserve Bank.
2. Funding Source for Securities Purchase
In paragraph 2 of Schedule 1, a new clause “4A” was added. This clause clarifies that the consideration for the purchase of dated Government Securities/treasury bills under sub-paragraph (E) of paragraph 1 should be paid out of funds held in the rupee account maintained under regulation 7(1) of the Foreign Exchange Management (Deposit) Regulations, 2016.
3. Handling of Sale/Maturity Proceeds
Another significant addition was made to paragraph 4 of Schedule 1. A new clause “2A” was introduced, stipulating that the sale or maturity proceeds (net of applicable taxes) of instruments held by persons resident outside India with a rupee account under regulation 7(1) of the Foreign Exchange Management (Deposit) Regulations, 2016, shall be credited to the same rupee account.
RESERVE BANK OF INDIA
(Financial Markets Regulation Department)
(CENTRAL OFFICE)
NOTIFICATION
Mumbai, the 16th October, 2023
Foreign Exchange Management (Debt Instruments) (Second Amendment) Regulations, 2023
No. FEMA.396(2)/2023-RB.In exercise of the powers conferred by clause (a) of sub-section (2) of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments to the Foreign Exchange Management (Debt Instruments) Regulations, 2019 (Notification No. FEMA.396/2019-RB dated October 17, 2019) (hereinafter referred to as ‘the Principal Regulation’), namely:-
1. Short title and commencement
(i) These Regulations shall be called the Foreign Exchange Management (Debt Instruments) (Second Amendment) Regulations, 2023.
(ii) They shall come into force with effect from the date of their publication in the Official Gazette.
2. Amendment to Schedule 1 to the Principal Regulation
(i) In paragraph 1 of Schedule 1 to the Principal Regulation, after sub-paragraph D, the following new subparagraph shall be inserted:-
“E. Permission to persons resident outside India maintaining rupee account in terms of regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016
Persons resident outside India that maintain a rupee account in terms of regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016 may purchase or sell dated Government Securities/treasury bills, as per terms and conditions specified by the Reserve Bank.”
(ii) In paragraph 2 of Schedule 1 to the Principal Regulation, after clause (4) the following new clause shall be inserted: –
“(4A) The amount of consideration for purchase of dated Government Securities/treasury bills by persons resident outside India in terms of sub-paragraph (E) of paragraph 1 of this Schedule shall be paid out of funds held in their rupee account maintained in terms of regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016.”
(iii) In paragraph 4 of Schedule 1 to the Principal Regulation, after clause (2) the following new clause shall be inserted: –
“(2A) The sale/ maturity proceeds (net of taxes, as applicable) of instruments held by persons resident outside India that maintain a rupee account in terms of regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016 shall be credited to the said rupee account.”
DIMPLE BHANDIA, Chief General Manager
[ADVT.-III/4/Exty./501/2023-24]
Foot Note : The Principal Regulation was published in the Official Gazette vide G.S.R.No.796(E) dated October 17, 2019 in Part II, Section 3, sub-Section (i) and amended, vide:
1. Notification no. FEMA 396(1)/2021-RB [Foreign Exchange Management (Debt Instruments) (First Amendment) Regulations, 2021] dated October 13, 2021 published in the Gazette of India [Extraordinary, Part III–Section 4], vide Gazette ID CG-MH-E-21102021-230591 dated 21.10.2021.
