Foreign investment caps and entry routes updated; sectoral conditions and disclosure rules govern automatic and government approvals.
The amendment revises Annex B to Schedule 1, specifying sectoral foreign investment caps, entry routes (automatic or government approval) and associated conditions. It permits foreign investment in defined agricultural activities under controlled conditions, allows manufacturing under the automatic route with sales via wholesale/retail/e commerce, sets tiered entry and security/licensing conditions for defence, prescribes entry and compliance requirements for broadcasting, airports, SBRT and pharmaceuticals, and mandates disclosures and certifications for brownfield pharmaceutical investments.

Foreign investment caps in air transport services revised; foreign airlines require government approval and regulatory and security clearances.
Revision to foreign investment policy for Air Transport Services sets sectoral ceilings and entry routes: scheduled and regional passenger airlines have a capped foreign equity limit while non-scheduled, helicopter and seaplane services are permitted full foreign investment on the automatic route, with an NRI dispensation noted. Foreign airlines may invest in cargo, helicopter and seaplane operators within limits and may invest in scheduled and non-scheduled operators up to the ceiling under the government approval route; that ceiling subsumes other foreign investments and is subject to SEBI compliance. Scheduled Operator's Permit and security, ownership, director nationality, and equipment clearance conditions apply; policy excludes Air India Limited.

Foreign investment in pension funds permitted under automatic route, subject to PFRDA registration and resident ownership and control.
Foreign investment in Indian pension funds is permitted up to 49% under the automatic route, contingent on investors obtaining PFRDA registration and complying with PFRDA Act requirements for participation in pension fund management; Indian pension funds must ensure ownership and control remain with resident Indian entities as defined in Regulation 14 of the principal FEMA regulations.

Asset Reconstruction Companies: non resident investors permitted full ownership under automatic route, SR investments subject to RBI directions.
Persons resident outside India may invest up to 100% in Asset Reconstruction Companies under the automatic route, with sponsor shareholding and other investor limits governed by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. A single FII/FPI must hold below 10% of paid up capital. FIIs/FPIs may invest in Security Receipts issued by ARCs up to 100% of each tranche, subject to Reserve Bank of India directions/guidelines and applicable regulatory caps.

Non-resident participation in exchange-traded currency derivatives permitted to hedge Rupee exposure, subject to RBI directions.
Regulation 5B is substituted to permit persons resident outside India who are exposed to Rupee currency risk from permitted current account transactions or from Rupee-denominated assets or liabilities to transact exchange-traded currency derivatives on a stock exchange recognised under the Securities Contracts (Regulation) Act, 1956, subject to terms and conditions specified in directions issued by the Reserve Bank of India.

Securitised debt instruments inclusion under FEMA clarifies foreign investment eligibility and issuance conditions for non-residents.
The Amendment to Schedule 5 of the FEMA transfer/issue regulations deletes the word "listed" from certain clauses, removes clauses (g) and (j) in paragraphs 1 and 1C, and adds clause (n) to include securitised debt instruments, defined to cover SPV-issued certificates for asset securitisation with banks, FIs or NBFCs as originators and certificates issued and listed under SEBI Regulations on Public Offer and Listing of Securitised Debt Instruments, 2008.

Pre incorporation expenditure equity issuance allowed to wholly owned Indian subsidiaries, subject to reporting, valuation and auditor certification.
Authorizes a wholly owned Indian subsidiary of a non resident entity in sectors allowing 100% FDI under the automatic route to issue equity, preference shares, convertible debentures or warrants to the non resident parent against pre incorporation/pre operative expenses up to regulatory limits, subject to Form FC GPR reporting within thirty days of issue (and not later than one year from incorporation unless permitted otherwise), valuation per Paragraph 5 of Schedule 1, and submission of a statutory auditor's certificate confirming utilization of the funds for incorporation/commencement purposes.

Foreign investment in Other Financial Services allowed full entry automatically when regulated, otherwise via government approval with conditions.
Amendment replaces Paragraph F.8 to define Other Financial Services as activities regulated by a financial sector regulator and permits full foreign investment via the automatic route when regulated, subject to conditions. Activities not regulated or partially regulated require Government approval for foreign investment, with conditions including minimum capitalization. Statutory limits prescribed by specific Acts prevail, and downstream investments by entities in Other Financial Services are subject to sectoral regulations and the Foreign Exchange Management Regulations, 2000.

Loans outside India: authorised dealers' overseas branches may grant loans secured by NRE account funds with remittance for liquidation.
Authorised dealers' overseas branches or correspondents may grant loans to or in favour of non-resident depositors or to third parties at the depositor's request for bona fide purposes, against the security of funds held in NRE accounts in India, and may agree to remittance of funds from India, if necessary, for liquidation of the outstanding.

Foreign exchange derivative contracts permit residents to enter and write standalone options against permitted underlying exposures under RBI conditions.
Residents in India may enter into foreign exchange derivative contracts to hedge or otherwise in respect of transactions permissible under the Foreign Exchange Management Act, in accordance with Schedule I, and Schedule I is amended to permit writing standalone options: cross currency options (excluding the rupee) and foreign currency-rupee options through authorised dealers against permitted underlying foreign exchange exposures, subject to terms and conditions stipulated by the Reserve Bank of India.

Foreign currency accounts for startups allowed offshore to receive export earnings, subject to prescribed repatriation requirements.
The amendment allows insurance/reinsurance companies registered with IRDA to maintain foreign currency accounts abroad for business expenditures and to credit premia received outside India. It further permits Indian startups, or other entities notified by the Reserve Bank in consultation with the Central Government that have overseas subsidiaries, to open foreign currency accounts abroad to credit export/sales earnings and overseas subsidiary receivables, provided account balances are repatriated to India within the period prescribed under the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015; "startup" follows the government notification definition.

Deferred payment for cross-border share transfers permitted subject to escrow or indemnity and compliance with pricing guidelines.
Regulation 10A permits a buyer in transfers between resident and non-resident parties to pay a portion of the total consideration on a deferred basis for a limited period; the deferred portion may be secured by an escrow arrangement for that period or, if the full consideration is paid immediately, by a seller's indemnity for the same period. The total consideration ultimately paid must comply with applicable pricing guidelines.

Foreign exchange transaction modes: prescribed currencies and authorized instruments govern receipts and payments under FEMA rules.
The Regulations prescribe permissible modes and currencies for receipts and payments in foreign exchange, differentiating ACU members, Nepal and Bhutan, Iran, and other countries; require export receipts to be in the currency appropriate to the declared place of final destination; permit third party receipts and payments and alternative instruments (bank drafts, card receipts, debit to FCNR/NRE accounts, specified rupee receipts, precious metals for certain exporters) subject to conditions; and allow payments by international cards and rupee payments for specified visitor expenses and director remunerations, subject to compliance with the Act and foreign trade policy.

Foreign Venture Capital Investor investment rules expanded to include startups and Cat I AIF units under amended FEMA regulations.
The amendment inserts a Cat I AIF definition and a detailed startup definition, and revises FVCI rules: SEBI registered Foreign Venture Capital Investors may invest in unlisted Indian companies in specified sectors and in any startup, acquire units of VCFs or Cat I AIFs, and make purchases from issuers, holders or on recognised exchanges without prior RBI approval. Consideration must come via inward remittance or proceeds/income from prior investments; designated foreign currency/rupee accounts may be maintained solely for Schedule transactions; transfers may be made to residents or nonresidents at mutually agreed prices; and reporting to RBI or SEBI is required.

Foreign investment control broadened; downstream notifications and share swap valuation conditions imposed for regulatory compliance.
The notification amends FEMA definitions and procedures: control is broadened to include appointment and management control including for LLPs; all forms of overseas securities and convertible instruments are treated as foreign investment; downstream investments must be notified to SIA, DIPP and FIPB within thirty days even if shares are not allotted; share-swap entries into automatic route sectors are allowed subject to valuation by a SEBI-registered Merchant Banker or an appropriately registered foreign Investment Banker; sectoral FDI conditions for defence, single brand retail and duty free shops are revised and FIIs/FPIs in CICs cannot seek board representation based on shareholding.

Cross border deposit regulation: RBI framework for non resident accounts, repatriation and compliance obligations.
The Regulations prohibit cross border deposits except as authorised, establish eligibility and operational rules for NRE, FCNR(B) and NRO accounts (permitted credits/debits, account forms, interest, change of residential status, nominee remittances), permit lending against deposits subject to bona fide use and Reserve Bank directions, prescribe terms for corporate repatriable and non repatriable deposits, and create SNRR and Escrow account regimes with specified conditions, repatriation rules, reporting and KYC obligations for authorised dealers and banks.

Remittance of assets: RBI permission required for cross-border transfers of Indian-held assets, with annual caps and compliance conditions.
Regulations prohibit outward remittance of assets held in India except as permitted; they define remittance of asset broadly and establish permissive pathways with documentary, auditor and authorised dealer conditions for foreign citizens, NRIs/PIOs, companies under liquidation and branch/office closures, impose an annual ceiling (US$1,000,000) for specified remittances, require RBI prior approval where ceilings or hardship grounds apply, and make remittances subject to applicable Indian tax laws.

Establishment of foreign offices in India requires RBI approval and compliance with eligibility, activity and reporting rules.
The Regulations require prior Reserve Bank approval for establishment in India of branch, liaison, project or other business offices by non residents, subject to statutory exceptions. They set financial eligibility criteria or allow a parent Letter of Comfort, prescribe permitted activities by office type, require application via Form FNC through an Authorised Dealer Category I bank, impose reporting and audit obligations including an Annual Activity Certificate, govern remittance of profits and winding up proceeds, and mandate Reserve Bank clearance or additional registration for specified nationalities, sectors and regions.

Foreign investment cap in insurance retained with automatic route access, subject to IRDAI verification and regulatory conditions.
Amendment revises the Schedule to permit foreign investment in specified insurance entities up to a 49% foreign equity cap on the automatic route. Covered entities include Insurance Companies, Brokers, Third Party Administrators, Surveyors and Loss Assessors, and other IRDAI-appointed intermediaries. The investment is subject to IRDAI approval/verification, compliance with the Insurance Act, licence requirements, Indian ownership and control criteria, FEMA and SEBI portfolio investment provisions, RBI pricing guidelines for any increase, and applicability of certain banking-sector provisions to bank-promoted insurance companies.

FDI policy reforms clarify ownership, control, downstream investment and sectoral entry routes, altering compliance obligations.
Amendments clarify definitions and compliance for foreign investment in India by inserting a definition of Manufacture, redefining ownership and control (including LLPs and the right to appoint directors or designated partners), and tightening downstream investment and reporting requirements. Indian entities making downstream investments must notify authorities, comply with valuation and funding norms, and obtain annual statutory auditor certification of FDI conditionality compliance; investment vehicles and LLPs are subject to specified entry route, ownership tests and sectoral caps as reflected in revised Schedules.