Foreign security transfer threshold increased under FEMA, raising regulatory limits and applying retrospectively to the specified prior date.
The amendment replaces the previously stated monetary threshold in Regulation 21 and in the specified clause of Schedule I of the principal FEMA transfer/issue regulations with a higher threshold for transfers or issues of foreign securities, and declares that these substitutions are deemed to have been effective from the earlier specified date stated in the notification.

Foreign investment limits: MSEs may issue securities to non residents under Entry Routes; non MSE undertakings capped at 24% without approval.
The amendment permits companies classified as Micro and Small Enterprises under the MSMED Act, 2006 (including specified export or technology park units) that are not engaged in activities listed in Annex A to issue shares or convertible debentures to persons resident outside India subject to Entry Routes, Annex B limits, and the Foreign Direct Investment Policy; it also allows industrial undertakings licensed for items reserved for MSE manufacture to issue shares to non residents up to 24% of paid up capital, with any excess requiring prior government approval.

FDI conditions updated: transfer and issue rules amended to remove certain prior permission provisos and revise sectoral restrictions.
The amendment removes provisos requiring prior Central Government permission for transferees with existing ventures or collaborations, revises Schedule 1 to allow share issuance against SEZ capital goods subject to valuation by a Development Commissioner-Customs Committee, and substitutes paragraph 3 to delineate circumstances requiring FIPB approval for issuance to non-residents, including specified activities, issuance beyond sectoral limits, share swaps, issuance against capital goods or preoperative expenses, and updates the list of sectors prohibited for FDI in Annex A.

Transfer of foreign contribution subject to approval and reporting; limited transfers to unregistered persons require application and declaration.
The amendment excludes articles gifted for personal use from the definition of foreign contribution where their market value in India on the date of gift does not exceed a prescribed monetary threshold. It also establishes a procedure allowing a registered person to transfer a limited portion of foreign contribution to an unregistered person only after applying to the Central Government in Form FC 10 and making a declaration; transfers to other registered persons are permitted without prior approval provided the recipient is not proceeded against, and both parties must reflect transfers in Form FC 6 returns.

Escrow accounts for share consideration allowed without prior approval, subject to specified FEMA and SEBI compliance and conditions.
Schedule 9 permits resident and non resident acquirers to open INR escrow accounts with AD Category I banks and escrow securities with SEBI depository participants without prior RBI approval, for payment of share purchase consideration. Accounts must be non interest bearing, cannot secure facilities, and accept only specified credits (foreign inward remittances for share issue/transfer or rupee consideration from resident acquirers) and debits (remittance to issuer/transferor or refund on non materialisation). Operations must comply with FEMA and applicable SEBI rules, KYC requirements, and the account is generally limited to six months unless RBI permits an extension.

Irrevocable Payment Commitment: custodian banks may issue IPCs for FII purchases under PIS, subject to regulatory exposure limits.
The Regulations add a definition of Irrevocable Payment Commitment (IPC) as an irrevocable confirmation by a custodian bank to a stock exchange/clearing corporation to meet payment obligations on buy transactions, and authorise custodian banks to issue IPCs for registered FII clients for purchases under the Portfolio Investment Scheme. IPCs issued prior to receipt of customer funds are to be reckoned in the custodian bank's Capital Market Exposure and must comply with regulatory exposure limits and Reserve Bank/DBOD directions.

Hedging permissions: registered FIIs may use foreign currency rupee swaps and non resident traders may hedge rupee invoiced trade under RBI terms.
The Regulations add permissions in Schedule II allowing a registered FII to enter into foreign currency rupee swaps to hedge transient capital flows related to IPOs under ASBA, and permitting non resident importers/exporters to enter forward contracts with rupee as one currency or foreign currency rupee option contracts with an Authorised Dealer to hedge currency risk on rupee invoiced trade, each subject to terms and conditions prescribed by the Reserve Bank and deemed to commence retrospectively.

Indian Depository Receipts: new rules let domestic depositories hold underlying foreign shares and set redemption conditions.
Regulation 2 adds definitions for Domestic Depository, Eligible Company and Indian Depository Receipts by reference to the Companies (Issue of Indian Depository Receipts) Rules, 2004, with the Regulations deemed effective from 22 July 2009. Regulation 22(7) permits a Domestic Depository to acquire, hold and transfer equity shares abroad as underlying shares for issuing IDRs, and sets redemption conditions: listed companies and SEBI registered mutual funds may sell or retain underlying shares pursuant to specified Regulations of the principal FEMA Notification, while other residents including individuals may hold underlying shares only to sell within 30 days of conversion.

Indian Depository Receipts: Eligible foreign companies may issue INR denominated IDRs subject to regulatory compliance and investor conditions.
Eligible companies resident outside India may issue Indian Depository Receipts (IDRs) through a Domestic Depository to persons resident in India and abroad, subject to compliance with the Companies (Issue of Indian Depository Receipts) Rules, 2004 and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009; financial/banking issuers with presence in India require prior sectoral regulator approval; IDRs must be denominated in Indian Rupees and proceeds immediately repatriated. SEBI-registered FIIs and NRIs may purchase, hold or sell IDRs subject to conditions including investment from specified NRI accounts, non-automatic fungibility, one-year minimum before redemption into equity, and compliance with foreign exchange conversion provisions.

Security classification: Indian Depository Receipts are treated as securities under the foreign exchange regulatory framework.
The Reserve Bank notifies that Indian Depository Receipts (IDRs), as defined under the Companies (Issue of Indian Depository Receipts) Rules, 2004, are to be treated as a security for the purposes of the Foreign Exchange Management Act, bringing IDRs within the regulatory and compliance framework applicable to securities under foreign exchange law.

Limits and margin requirements extended to include prescribed collateral stipulations for transfers or issues of securities by non-residents.
Amendment incorporates prescribed limits and margin requirements and stipulations regarding collateral securities into regulation 5, tying compliance for transfers or issues of securities by persons resident outside India to regulatory prescriptions as specified by the Reserve Bank from time to time; the Amendment Regulations are given retrospective effect from April 12, 2010 and include a clarification that no person will be adversely affected by that retrospective application.