FEMA

CA. Manoj Shah, CA Viral Satra

Investments by Foreign Portfolio Investors in Government Securities – Amendments to Regulatory Framework

A.P. (DIR Series) Circular No. 11 dated June 05, 2026

The Reserve Bank of India has liberalised the investment framework applicable to Foreign Portfolio Investors (FPIs) investing in Government Securities under the General Route. RBI has withdrawn the requirement relating to short-term investment limits, security-wise limits and concentration limits applicable to FPI investments in Government Securities. Further, the existing categories of “general” and “long-term” investment limits have been merged into a single investment limit for Central Government Securities and State Government Securities respectively. Additionally, certain Government Securities and Sovereign Green Bonds have been included under the Fully Accessible Route (FAR), thereby expanding investment opportunities for foreign investors.

Impact: The amendment simplifies the investment framework and is expected to facilitate greater foreign participation in the Indian Government securities market.

NOP-INR Position of Authorised Dealer Category-I Banks

A.P. (DIR Series) Circular No. 13 dated June 08, 2026

RBI has permitted AD Category-I banks to exclude swap positions arising from FCNR(B) deposits, External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs) mobilised under the RBI Swap Facility from the computation of their NOP-INR position.

Impact: This relaxation enables banks to mobilise foreign currency resources under the swap scheme without adversely impacting their regulatory open position limits.

Liberalisation of Foreign Portfolio Investment under Schedule III of FEMA (NDI) Rules, 2019

A.P. (DIR Series) Circular No. 14 dated June 15, 2026

Pursuant to amendments made in the FEMA (Non-Debt Instruments) Rules, 2019, RBI has extended the eligibility for investment under Schedule III to all individual persons resident outside India. Earlier, such investments were restricted only to NRIs and OCIs. AD Category-I banks have been permitted to open repatriable INR accounts for such investors. Reporting and monitoring requirements will continue to be undertaken in the same manner as currently applicable to NRI/OCI investments.

Impact: The amendment significantly broadens the investor base for listed Indian equities and is expected to enhance foreign portfolio inflows.

Reporting of FCNR(B) Deposits, ECBs and OFCBs Mobilised under RBI Swap Facility

A.P. (DIR Series) Circular No. 15 dated June 19, 2026

RBI has introduced daily reporting requirements for FCNR(B) deposits, External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs) mobilised under the RBI Swap Facility. AD Category-I banks are required to submit prescribed returns on a daily basis, including NIL returns where no transactions have occurred.

Impact: The reporting framework enables RBI to monitor the utilisation of the swap facility and assess its impact on foreign currency inflows and liquidity.

Open Positions of Authorised Dealer Category-I Banks

A.P. (DIR Series) Circular No. 16 dated June 23, 2026

RBI has further clarified that AD Category-I banks may exclude positions arising from hedged transactions relating to FCNR(B) deposits, ECBs and OFCBs mobilised under the swap facility while computing their net overnight open positions.

Impact: The clarification provides operational flexibility to banks participating in the swap scheme and removes regulatory constraints arising from associated hedging transactions.

Modification of Returns / Reporting Requirements under FEMA, 1999

A.P. (DIR Series) Circular No. 17 dated June 24, 2026

RBI has rationalised various reporting requirements applicable to Authorised Persons. Key changes include:

  • Revised FLM-8 return to capture write-off of foreign currency notes.

  • Discontinuation of RBI approval requirement for write-off of foreign currency notes exceeding USD 2,000.

  • Quarterly reporting of franchisee arrangements by Authorised Persons.

  • Quarterly reporting of MTSS sub-agents.

  • Discontinuation of FLM-1 to FLM-7 prescribed registers.

  • Withdrawal of certain MTSS-related returns and reporting requirements.

Impact: The amendment reduces compliance burden and streamlines reporting obligations for Authorised Persons, FFMCs and MTSS participants.

Review and Withdrawal of Obsolete FEMA Circulars

A.P. (DIR Series) Circular No. 18 dated June 24, 2026

As part of its regulatory rationalisation initiative, RBI has undertaken a comprehensive review of FEMA circulars issued since June 1, 2000 and withdrawn those which have become redundant, obsolete or superseded due to subsequent regulatory developments.

Impact: The withdrawal improves regulatory clarity and reduces interpretational issues arising from multiple overlapping circulars.

RBI FAQs on Swap Facility for FCNR(B) Deposits, ECBs and OFCBs

FAQs issued by RBI

RBI has issued clarifications in the form of Frequently Asked Questions (FAQs) regarding the Swap Facility announced on June 8, 2026. Important clarifications include:

  • Banks may extend loans or issue SBLCs against FCNR(B) deposits mobilised under the scheme.

  • RBI swap facility covers only the principal amount and not the interest component.

  • Swaps may be undertaken even where residual maturity is less than three years, provided original maturity is at least three years.

  • ECBs with average maturity of three years or more are eligible under the scheme.

  • Swap tenor will be co-terminus with ECB repayment schedule, subject to a maximum of five years.

Impact: The FAQs provide operational clarity to banks and borrowers regarding implementation of the swap facilities announced by RBI.