Updated Master Direction On Foreign Investment In India: Clarifications To The Regulatory Framework

Background

The Reserve Bank of India ("RBI") recently updated the Master Direction on Foreign Investment in India ("Master Direction") to address various ambiguities in the regulatory framework for downstream investments by foreign owned or controlled companies ("FOCCs"), cross-border share swaps, and issue of shares to foreign shareholders pursuant to a scheme of merger or amalgamation. The Master Direction also incorporates a comprehensive framework for the issue of benefit-based equity instruments by Indian companies to directors and employees' resident outside India. The Master Direction complements the existing framework under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 ("NDI Rules"). This note highlights the key clarifications and changes to the regulatory framework for inbound investments brought about by the Master Direction.