Insights

FEMA - Key takeaways on important updates

We have compiled a concise summary of the changes introduced by the Reserve Bank of India under the Foreign Exchange Management Act (FEMA) for your quick reference.

These changes are aimed at promoting the Indian Rupee in international trade and investment. Key updates include:-

• A Person Resident Outside India (PROI) can now open and maintain a Special Non-Resident Rupee (SNRR) account with an Authorized Dealer (AD) bank in India or its overseas branch. Funds in such foreign currency accounts can be used for import payments, trade-related expenses, and any balance must be repatriated to India by the end of the following month.
• Investments allowed through these accounts include FDI in equity shares, compulsorily convertible debentures (CCDs), LLPs, and convertible notes issued by startups.
• Sale proceeds and dividends from such investments can be repatriated back into the same account or to the investor’s home country.
• Extending the eligibility requirement for opening Diamond Dollar Accounts (DDAs) from a 2-year to a 3-year track record in the diamond/gem/jewellery trade.
• A new clause introduced by RBI caps the compounding amount at INR 2,00,000 per contravention for certain non-reporting violations, at the discretion of the compounding authority based on the case facts and public interest.

These updates reflect a move towards a more streamlined and globally aligned forex framework.