CURRENT AFFAIRS
CURRENT AFFAIRS
Description
The Reserve Bank of India (RBI) has issued regulations under the Foreign Exchange Management Act (FEMA) to promote Indian companies' direct listing on overseas stock markets. These regulations aim to streamline foreign exchange transactions and reporting requirements, giving corporations more freedom in how they use capital obtained through overseas listings.
Key Regulations
Mode Of Payment And Reporting- The regulations require that the profits from the acquisition or subscription of equity shares of Indian firms listed on international markets be transferred to an Indian bank account or deposited in the Indian company's foreign currency account. Sale revenues, net of taxes, can be sent abroad or deposited to the permissible holder’s bank account. The investee Indian company will report foreign exchange transactions through an authorized dealer. If a Foreign Portfolio Investor (FPI) invests on a stock exchange, the authorized dealer will notify the RBI.
Foreign Currency Accounts- Unused or repatriated funds raised by Indian residents through External Commercial Borrowings (ECB), American Depository Receipts (ADRs), Global Depository Receipts (GDRs), or direct listing of equity shares on international exchanges will be held in foreign currency accounts with a bank outside India.
Expert Insights
Manan Lahoty, Partner, IndusLaw: These improvements remove administrative barriers and allow for more efficient capital utilization for overseas acquisitions, expansions, and other forex purposes.
Nilesh Tribhuvann, Managing Partner at White & Brief - Advocates and Solicitors: The regulations provide enterprises with flexibility in fund management, allowing them to connect their operational needs with investment objectives. Enhanced reporting requirements promote openness and compliance, hence facilitating India's entrance into the global economy.
Broader Implications
These regulations, which expand on the Finance Ministry's scheme for the direct listing of equity shares on international markets, demonstrate India's commitment to creating a favorable environment for global competitiveness and encouraging foreign investment. Aligning company strategy with these regulations will allow enterprises to properly capitalize on foreign finance opportunities while also contributing to India's global economic progress.
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