The Reserve Bank of India (‘RBI’) through its AP (DIR Series) Circular No. 09 dated 7th June 2024 has issued clarifications amending the norms for Indian residents to make investments in overseas funds as Overseas Portfolio Investments (‘OPI’).
RBI’s amendments clarifies overseas investment rules, allowing more flexibility for Indian entities to invest in global funds, boosting opportunities in GIFT City.
Earlier, OPI investment was permitted only if –
- the overseas fund itself was duly regulated; and
- the investments were solely in the form of ‘units’ of these funds.
This restriction posed challenges under the OPI route since many offshore funds are structured as corporate bodies issuing shares / stocks or partnership interests, not just trusts issuing units.
The synopsis of the key amendments are as under:
1. Now, RBI allows listed Indian companies and resident individuals to invest in offshore funds that are managed by regulated fund managers in jurisdictions, even if such fund itself is not duly regulated.
This amendment will provide greater boost to OPI investments into Singapore and USA. It is interesting to note that this amendment is in line with the international standards and regulatory framework governing funds in GIFT City (i.e., IFSCA (Fund Management) Regulations, 2022).
2. Further, these OPI investments can be in any instrument (by whatever name called), regardless of its form, and in overseas funds set up as Limited Partnerships (‘LPs’), limited liability companies (‘LLCs’), Variable Capital Company (‘VCCs’) funds, companies or trusts.
These amendments now permit eligible Indian investors to invest in various instruments under the OPI route into overseas funds set up in various types of legal forms in commercially favourable jurisdictions thus providing greater flexibility for investors.
To summarize, the above OPI related regulatory changes by the RBI, will not only provide a conducive environment for overseas investments but in addition will also significantly boost fundraising activities and efforts in GIFT City for offshore investments. The ability of Indian investors particularly the unlisted entities to invest in IFSC funds opens up new avenues for capital commitment, paves way for Indian investors to participate in global markets.
For further information on the technical details and overseas investments - Let’s connect- umesh.lakhani@bathiya.com, anand.bathiya@bathiya.com, rima.gandhi@bathiya.com
