The Reserve Bank of India, vide Notification No. FEMA.395(4)/2026-RB dated June 13, 2026, has amended the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, refining the payment mechanics applicable to NRI/OCI investments on a repatriation basis and to equity shares of Indian companies listed on International Exchanges, while also updating the reporting framework for Authorised Dealer banks.
Background
The amendment has been issued in exercise of powers conferred under Section 47 of the Foreign Exchange Management Act, 1999, and modifies the Principal Regulations notified vide Notification No. FEMA.395/2019-RB dated October 17, 2019 (G.S.R. No. 795(E) dated October 17, 2019). The Principal Regulations have previously been amended on three occasions — in 2020, 2024, and January 2025 — and this notification represents the fourth amendment in the series. The Regulations come into force from the date of their publication in the Official Gazette.
Amendment to Schedule III: Investments by Individuals Resident Outside India
Schedule III of Regulation 3.1 governs investments by an individual person resident outside India, including Non-Resident Indians (NRIs) or Overseas Citizens of India (OCIs), made on a repatriation basis. The amended provision clarifies the mode of payment and remittance of sale proceeds as follows.
On the payment side, the amount of consideration must be paid either as an inward remittance from abroad through banking channels, or out of funds held in a repatriable deposit account maintained under the Foreign Exchange Management (Deposit) Regulations, 2016. Significantly, the amendment introduces a requirement that an individual person resident outside India must designate a specific repatriable rupee account, maintained under the 2016 Deposit Regulations, to be used exclusively for investments permitted under this Schedule. Separately, for subscription to the National Pension System (NPS) by NRIs/OCIs, payment may be made via inward remittance from abroad, or from a repatriable foreign currency account, rupee account, or NRO account maintained under the 2016 Deposit Regulations.
On the remittance of sale proceeds, the amendment retains the position that sale proceeds (net of taxes) of equity instruments may either be remitted outside India or credited to the designated rupee account of the investor. For sale proceeds of mutual fund units and NPS subscriptions by NRIs/OCIs, the investor now has the option to either remit the proceeds outside India or credit them to any account maintained under the 2016 Deposit Regulations.
Amendment to Schedule XI: Purchase of Equity Shares on International Exchanges
Schedule XI governs the purchase or subscription of equity shares of companies incorporated in India that are listed on an International Exchange, under the permissible holder framework. The amended provision specifies that the consideration for such purchase or subscription may be paid either through banking channels to a foreign currency account of the Indian company, maintained under the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015, or as an inward remittance from abroad through banking channels, or out of funds held in a repatriable foreign currency or rupee account maintained under the 2016 Deposit Regulations.
The amendment also adds an explanation clarifying that the proceeds of such purchase or subscription must either be remitted to a bank account in India or deposited in the Indian company's foreign currency account under the 2015 Regulations. On the sale side, sale proceeds (net of taxes) of the equity shares may be remitted outside India or credited to the bank account of the permissible holder, maintained under the 2016 Deposit Regulations.
Amendment to Reporting Requirements under Regulation 4
Sub-regulation (9) of Regulation 4, which deals with the LEC (Individual Foreign Investor) reporting form, has also been substituted. Under the amended provision, designated Authorised Dealer Category-I banks are required to report to the Reserve Bank, in Form LEC (IFI), the purchase or transfer of equity instruments by an individual person resident outside India — including NRIs or OCIs — on stock exchanges in India.
Conclusion
This amendment streamlines and consolidates the payment and remittance mechanics applicable to repatriable investments by NRIs and OCIs, while also formalising the payment route for equity shares of Indian companies listed on International Exchanges under the permissible holder scheme. The accompanying update to the LEC (IFI) reporting requirement reinforces the reporting discipline expected of AD Category-I banks in respect of secondary market transactions by individual foreign investors. Entities and individuals dealing in non-debt instrument investments from outside India should review their existing account structures and remittance arrangements to ensure alignment with the amended Schedules.
Compliance. Simplified. — PMK Advisors
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