Reserve Bank of India (RBI) issued a circular (RBI/2024-25/36, A.P. (DIR Series) Circular No. 7) on May 21, 2024, addressing all Authorised Dealer Category-I banks regarding the issuance of partly paid units to persons resident outside India by investment vehicles under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. Following amendments to these rules on March 14, 2024, the RBI has decided to regularize prior issuances of such units by Alternative Investment Funds through the compounding process under the Foreign Exchange Management Act, 1999. Authorised Dealer banks must ensure all necessary administrative actions, including reporting via the FIRMS Portal and issuing conditional acknowledgements, are completed before seeking RBI’s compounding approval. Banks are instructed to inform their customers of these changes. This circular is issued under the authority of sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999.
RESERVE BANK OF INDIA
RBI/2024-25/36
A.P. (DIR Series) Circular No. 7 Dates: May 21, 2024
To
All Authorised Dealer Category – I banks
Madam / Sir
Issuance of partly paid units to persons resident outside India by investment vehicles under Foreign Exchange Management (Non-debt Instruments) Rules, 2019
Attention of Authorised Dealer (AD) Category – I banks is invited to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, notified by the Central Government on October 17, 2019, which have been amended through the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2024 vide S.O. 1361(E), dated March 14, 2024, enabling issuance of partly paid units to persons resident outside India by investment vehicles.
2. In this regard, it has been decided to regularise the issuances of partly paid units by Alternative Investment Funds to persons resident outside India prior to the said amendment through compounding under Foreign Exchange Management Act, 1999. However, before approaching the Reserve Bank for compounding, AD Category-I banks may ensure that the necessary administrative action, including the reporting of such issuances by Alternative Investment Funds to the Reserve Bank, through Foreign Investment Reporting and Management System (FIRMS) Portal and issuing of conditional acknowledgements for such reporting, is completed.
3. AD Category-I banks may bring the contents of this circular to the notice of their customers / constituents concerned.
4. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully
(Dr. Aditya Gaiha)
Chief General Manager-in-Charge
