The Reserve Bank of India (RBI) on Tuesday released a draft aimed at simplifying foreign investment regulations, seeking public comments until August 31. The initiative is designed to reduce compliance burdens for foreign investors and align with the government's foreign direct investment (FDI) policy, according to a report by Livemint.
A key feature of the proposed changes is the clear separation between the government’s FDI policy and the procedural provisions of the Foreign Exchange Management Act (FEMA). Under the draft rules, operational matters will remain under FEMA, while sectoral caps and entry routes will be governed by the FDI policy, as noted by Moneycontrol. This aims to improve regulatory coherence and facilitate timely adjustments to policy.
Additionally, the draft expands the scope of eligible investee entities to not only companies and limited liability partnerships (LLPs) but also other entities. This update follows the recent expansion of the portfolio investment scheme to individuals living outside India, which increased the individual investment cap to 10% from 5% and raised the aggregate limit for all such investors to 24% from 10%. The RBI indicated these moves are part of a broader effort to modernize India's foreign investment framework, as highlighted in the Budget 2026-27 directive for reviewing non-debt instruments (NDI) rules.
The proposed changes could enhance foreign investment flows into sectors like technology and infrastructure, as the simplified regulations may attract more foreign capital. Investors will watch for feedback from foreign stakeholders and any adjustments to the rules before the end of the comment period on August 31.