Foreign Exchange Management (Non-Debt Instruments) (Fourth Amendment) Rules, 2024: Key Highlights

In a bid to simplify the foreign investment norms, certain amendments were made to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 ("Principal Rules")¹ on August 16, 2024, vide the notification of Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2024 ("Amendment Rules").

The key highlights of the Amendment Rules are as follows:

1. Swap of Equity Instrument and Equity Capital.

The most striking amendment is the introduction of cross border equity swap. Prior to the amendment, the Principle Rules only allowed swap of equity instruments of Indian companies to non-residents by way of issuance. This was conditional upon such Indian companies being under the automatic route sector wherein 100% foreign direct investment was allowed without any prior approval requirement ("Automatic Route Sector")².