Foreign Exchange Management (Transfer or issue of any foreign security) regulations, 2004 govern the provisions related to Direct Investment outside India.

This regulation allows Investment outside in various circumstances in different forms and manners.

Regulation 6 provides that Indian party may make direct investment in a Joint Venture or Wholly Owned Subsidiary outside India subject to certain conditions and procedures.

Vide circular no. 53 dated 27-6-2008, RBI stated that, "Registered Trusts and Societies engaged in manufacturing / educational sector to make investment in the same sector(s) in a Joint Venture or Wholly Owned Subsidiary outside India, with the prior approval of the Reserve Bank."

For this purpose, the eligible persons were required to stratify the criteria as per annexure to the circular 53 dated 27-6-2008.

RBI is still required to issue a notification to incorporate in the regulations.

Now, wide circular no. 7 dated 13/8/2008, RBI  has allowed  Registered Trusts and Societies which have set up hospital(s) in India to make investment in the same sector(s) in a Joint Venture or Wholly Owned Subsidiary outside India, with the prior approval of the Reserve Bank.

The other terms and conditions as specified in circular no. 53 dated 27-6-2008 will remain same.

We wish that RBI would issue suitable notification to amend the provision of Foreign Exchange Management (Transfer or issue of any foreign security) regulations, 2004 without any further delay to avoid any litigations.

 

Overseas direct investment by registered trusts and societies permitted in same sector with prior regulatory approval. Registered trusts and societies that have set up hospitals in India are permitted to make overseas direct investment in the same sector by establishing a Joint Venture or Wholly Owned Subsidiary, subject to the prior approval of the Reserve Bank and the other terms and stratified eligibility criteria specified in the earlier circular; a formal amendment to the Foreign Exchange Management Regulations is awaited to incorporate these relaxations.