The RBI issued a notification to amend the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 (“Regulations”) under the Foreign Exchange Management Act, 1999 (“FEMA”). The Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Tenth Amendment) Regulations, 2015 was notified on October 30, 2015 (“Notification”) which inter alia provides clarifications for computing of total foreign investment (direct as well as indirect).

As per the Notification, while computing total foreign investments in an Indian company, all types of investments, direct or indirect, made under various schedules in the Regulations (other than on non-repatriation basis)  including investments by an FII, FPI, NRI, QFI, investments in an Indian venture capital undertaking by a foreign venture capital investor, or issue/transfer of securities to a foreign depository will be taken into account. However, Foreign Currency Convertible Bonds and Depository Receipts, having underlying instruments issued under the Regulations, being in the nature of debt, will be treated as direct or indirect foreign investment only on conversion of debt into equity holding of an NR. Certain amendments have been made to Schedule I of the Regulations to bring it in line with the amendments/clarifications to the FDI Policy.

The Notification incorporates the changes made by the FDI Policy into FEMA. Further the clarifications relating to total foreign investments will enable authorities to correctly compute foreign investments in Indian entities.