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© Taxmann Price : ` 7295 (For a set of Two Volumes) Law stated in this book is as amended upto 15th July, 2026 Published by : Taxmann Publications (P.) Ltd. Sales & Marketing : 59/32, New Rohtak Road, New Delhi-110 005 India Phone : +91-11-45562222 Website : www.taxmann.com E-mail : sales@taxmann.com Regd. Office : 21/35, West Punjabi Bagh, New Delhi-110 026 India Printed at : Tan Prints (India) Pvt. Ltd. 44 Km. Mile Stone, National Highway, Rohtak Road Village Rohad, Distt. Jhajjar (Haryana) India E-mail : sales@tanprints.com Disclaimer Every effort has been made to avoid errors or omissions in this publication. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. It is notified that neither the publisher nor the author or seller will be responsible for any damage or loss of action to any one, of any kind, in any manner, therefrom. It is suggested that to avoid any doubt the reader should cross-check all the facts, law and contents of the publication with original Government publication or notifications. No part of this book may be reproduced or copied in any form or by any means [graphic, electronic or mechanical, including photocopying, recording, taping, or information retrieval systems] or reproduced on any disc, tape, perforated media or other information storage device, etc., without the written permission of the publishers. Breach of this condition is liable for legal action. For binding mistake, misprints or for missing pages, etc., the publisher s liability is limited to replacement within seven days of purchase by similar edition. All expenses in this connection are to be borne by the purchaser. All disputes are subject to Delhi jurisdiction only.
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CONTENTS PAGE
CONTENTS PAGE
Division Heads
I-5-I-6
List of Basic Notifications
I-21-I-30
List of Amending Notifications
I-31-I-54
List of Notifications
I-55-I-99
List of Notifications Issued under Prevention of Money-Laundering Act
I-101-I-114
List of Master Directions
I-115-I-116
List of FDI Circulars and Press Notes
I-117-I-118
List of Prescribed Forms
I-119-I-125 DIVISION ONE
FEMA GLOSSARY 1.1
Glossary of Important Definitions
1.3
DIVISION TWO
FOREIGN EXCHANGE MANAGEMENT ACT, 1999 CHAPTER I PRELIMINARY
1.
Short title, extent, application and commencement
2.3
2.
Definitions
2.4 CHAPTER II REGULATION AND MANAGEMENT OF FOREIGN EXCHANGE
3.
Dealing in foreign exchange, etc.
2.10
4.
Holding of foreign exchange, etc.
2.11
5.
Current account transactions
2.11
6.
Capital account transactions
2.12
7.
Export of goods and services
2.14
8.
Realisation and repatriation of foreign exchange
2.15
9.
Exemption from realisation and repatriation in certain cases
2.15
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CHAPTER III AUTHORISED PERSON
10.
Authorised person
2.16
11.
Reserve Bank s powers to issue directions to authorised person
2.18
12.
Power of Reserve Bank to inspect authorised person
2.18
CHAPTER IV CONTRAVENTION AND PENALTIES
13.
Penalties
2.18
14.
Enforcement of the orders of Adjudicating Authority
2.20
14A.
Power to recover arrears of penalty
2.22
15.
Power to compound contravention
2.22 CHAPTER V
ADJUDICATION AND APPEAL
16.
Appointment of Adjudicating Authority
2.23
17.
Appeal to Special Director (Appeals)
2.24
18.
Appellate Tribunal
2.26
19.
Appeal to Appellate Tribunal
2.26
20.
[Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]
2.29
21.
Qualifications for appointment of Special Director (Appeals)
2.29
22.
[Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]
2.30
23.
Terms and conditions of service of Special Director (Appeals)
2.30
24.
[Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]
2.30
25.
[Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]
2.30
26.
[Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]
2.31
27.
Staff of Special Director (Appeals)
2.31
28.
Procedure and powers of Appellate Tribunal and Special Director (Appeals)
2.31
29.
[Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]
2.32
30.
[Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]
2.32
31.
[Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]
2.32
32.
Right of appellant to take assistance of legal practitioner or Chartered Accountant and of Government, to appoint presenting officers
2.32
33.
Officers and employees, etc., to be public servant
2.33
34.
Civil court not to have jurisdiction
2.33
35.
Appeal to High Court
2.33
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CHAPTER VI DIRECTORATE OF ENFORCEMENT
36.
Directorate of Enforcement
2.34
37.
Power of search, seizure, etc.
2.34
37A.
Special provisions relating to assets held outside India in contravention of section 4
2.34
38.
Empowering other officers
2.35 CHAPTER VII MISCELLANEOUS
39.
Presumption as to documents in certain cases
2.35
40.
Suspension of operation of this Act
2.36
41.
Power of Central Government to give directions
2.36
42.
Contravention by companies
2.36
43.
Death or insolvency in certain cases
2.37
44.
Bar of legal proceedings
2.37
44A.
Powers of Reserve Bank not to apply to International Financial Services Centre
2.37
45.
Removal of difficulties
2.37
46.
Power to make rules
2.37
47.
Power to make regulations
2.39
48.
Rules and regulations to be laid before Parliament
2.40
49.
Repeal and saving
2.40
DIVISION THREE
RULES & REGULATIONS UNDER FEMA LIST OF RULES AND REGULATIONS
3.1
Foreign Exchange Management (Encashment of Draft, Cheque, Instrument and Payment of Interest) Rules, 2000
3.3
3.2
Foreign Exchange (Authentication of Documents) Rules, 2000
3.5
3.3
Foreign Exchange Management (Current Account Transactions) Rules, 2000
3.6
3.4
Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000
3.15
3.5
Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000
3.22
3.6
Foreign Exchange Management (Issue of Security in India by a Branch, Office or Agency of a Person Resident outside India) Regulations, 2000
3.26
3.7
Foreign Exchange Management (Borrowing and Lending) Regulations, 2018
3.27
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3.8
Foreign Exchange Management (Deposit) Regulations, 2016
3.45
3.9
Foreign Exchange Management (Export and Import of Currency) Regulations, 2015
3.64
3.10
Foreign Exchange Management (Guarantees) Regulations, 2026
3.69
3.11
Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2015
3.75
3.12
Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015
3.78
3.13
Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2015
3.91
3.14
Foreign Exchange Management (Insurance) Regulations, 2015
3.93
3.15
Foreign Exchange Management (Remittance of Assets) Regulations, 2016
3.95
3.16
Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023
3.99
3.17
Foreign Exchange Management (Non-debt Instruments) Rules, 2019
3.101
3.18
Foreign Exchange Management (Debt Instruments) Regulations, 2019
3.171
3.19
Foreign Exchange Management (Mode of Payment and Reporting of Non-debt Instruments) Regulations, 2019
3.178
3.20
Foreign Exchange Management (Establishment in India of a Branch Office or a Liaison Office or a Project Office or any other Place of Business) Regulations, 2016
3.189
3.21
Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026
3.200
3.22
Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000
3.208
3.23
Currency Futures (Reserve Bank) Directions, 2008
3.216
3.24
Appellate Tribunal for Foreign Exchange (Recruitment, Salary & Allowances & Other Conditions of Service of Chairperson & Members) Rules, 2000
3.220
3.25
Foreign Exchange Management (Offshore Banking Unit) Regulations, 2002
3.223
3.26
Foreign Exchange Management [Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)] Regulations, 2003
3.225
3.27
Foreign Exchange Management (Crystallization of Inoperative Foreign Currency Deposits) Regulations, 2014
3.229
3.28
Foreign Exchange Management (International Financial Services Centre) Regulations, 2015
3.231
3.29
Foreign Exchange Management (Regularization of Assets held Abroad by a Person Resident in India) Regulations, 2015
3.233
3.30
Foreign Exchange Management (Cross Border Merger) Regulations, 2018
3.234
3.31
Currency Futures in International Financial Services Centre (Reserve Bank) Directions, 2020
3.238
3.32
Currency Options in International Financial Services Centre (Reserve Bank) Directions, 2020
3.240
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3.33
Foreign Exchange Management (Margin for Derivative Contracts) Regulations, 2020
3.243
3.34
Foreign Exchange Management (Overseas Investment) Rules, 2022
3.245
3.35
Foreign Exchange Management (Overseas Investment) Regulations, 2022
3.259
3.36
Reserve Bank of India (Unhedged Foreign Currency Exposure) Directions, 2022
3.265
3.37
Foreign Exchange Management (Hedging of Commodity Price Risk and Freight Risk in Overseas Markets) Directions, 2022
3.272
3.38
Reserve Bank of India (Margin for Derivative Contracts) Directions, 2024
3.276
3.39
Foreign Exchange (Compounding Proceedings) Rules, 2024
3.278
3.40
Foreign Exchange Management (Authorised Persons) Regulations, 2026
3.284
ALPHABETICAL LIST OF RULES & REGULATIONS
Appellate Tribunal for Foreign Exchange (Recruitment, Salary & Allowances & Other Conditions of Service of Chairperson & Members) Rules, 2000
3.220
u
Currency Futures (Reserve Bank) Directions, 2008
3.216
u
Currency Futures in International Financial Services Centre (Reserve Bank) Directions, 2020
3.238
u
Currency Options in International Financial Services Centre (Reserve Bank) Directions, 2020
3.240
u
Foreign Exchange (Authentication of Documents) Rules, 2000
u
Foreign Exchange Management (Authorised Persons) Regulations, 2026
3.284
u
Foreign Exchange (Compounding Proceedings) Rules, 2024
3.278
u
Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000
3.15
u
Foreign Exchange Management (Borrowing and Lending) Regulations, 2018
3.27
u
Foreign Exchange Management (Cross Border Merger) Regulations, 2018
3.234
u
Foreign Exchange Management (Crystallization of Inoperative Foreign Currency Deposits) Regulations, 2014
3.229
u
Foreign Exchange Management (Current Account Transactions) Rules, 2000
3.6
u
Foreign Exchange Management (Debt Instruments) Regulations, 2019
3.171
u
Foreign Exchange Management (Deposit) Regulations, 2016
3.45
u
Foreign Exchange Management (Encashment of Draft, Cheque, Instrument and Payment of Interest) Rules, 2000
3.3
u
Foreign Exchange Management (Establishment in India of a Branch Office or a Liaison Office or a Project Office or any other Place of Business) Regulations, 2016
3.189
u
Foreign Exchange Management (Export and Import of Currency) Regulations, 2015
3.64
u
Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026
3.200
u
Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015
3.78
u
Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000
3.208
u
Foreign Exchange Management (Guarantees) Regulations, 2026
3.69
u
3.5
CONTENTS
I-12 PAGE
u
Foreign Exchange Management (Hedging of Commodity Price Risk and Freight Risk in Overseas Markets) Directions, 2022
3.272
u
Foreign Exchange Management (Insurance) Regulations, 2015
3.93
u
Foreign Exchange Management (International Financial Services Centre) Regulations, 2015
3.231
u
Foreign Exchange Management (Issue of Security in India by a Branch, Office or Agency of a Person Resident outside India) Regulations, 2000
3.26
u
Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023
3.99
u
Foreign Exchange Management (Margin for Derivative Contracts) Regulations, 2020
3.243
u
Foreign Exchange Management (Mode of Payment and Reporting of Non-debt Instruments) Regulations, 2019
3.178
u
Foreign Exchange Management (Non-debt Instruments) Rules, 2019
3.101
u
Foreign Exchange Management (Offshore Banking Unit) Regulations, 2002
3.223
u
Foreign Exchange Management (Overseas Investment) Rules, 2022
3.245
u
Foreign Exchange Management (Overseas Investment) Regulations, 2022
3.259
u
Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000
3.22
u
Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2015
3.91
u
Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2015
3.75
u
Foreign Exchange Management (Regularization of Assets held Abroad by a Person Resident in India) Regulations, 2015
3.233
u
Foreign Exchange Management (Remittance of Assets) Regulations, 2016
3.95
u
Foreign Exchange Management [Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)] Regulations, 2003
3.225
u
Reserve Bank of India (Unhedged Foreign Currency Exposure) Directions, 2022
3.265
u
Reserve Bank of India (Margin for Derivative Contracts) Directions, 2024
3.276
CHRONOLOGICAL LIST OF RULES & REGULATIONS CENTRAL GOVERNMENT u
GSR 379(E), dated 3-5-2000 - Foreign Exchange Management (Encashment of Draft, Cheque, Instrument and Payment of Interest) Rules, 2000
3.3
u
GSR 380(E), dated 3-5-2000 - Foreign Exchange (Authentication of Documents) Rules, 2000
3.5
u
GSR 381(E), dated 3-5-2000 - Foreign Exchange Management (Current Account Transactions) Rules, 2000
3.6
u
GSR 382(E), dated 3-5-2000 - Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000
3.15
u
GSR 677(E), dated 28-8-2000 - Appellate Tribunal for Foreign Exchange (Recruitment, Salary and Allowances and other Conditions of Service of Chairperson and Members) Rules, 2000
3.220
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CONTENTS PAGE
u
S.O. 3732(E), dated 17-10-2019 - Foreign Exchange Management (Non-debt Instruments) Rules, 2019
3.101
u
GSR 646(E), dated 22-8-2022 - Foreign Exchange Management (Overseas Investment) Rules, 2022
3.245
u
GSR 566(E), dated 12-9-2024 - Foreign Exchange (Compounding Proceedings) Rules, 2024
3.278
u
FEMA 1/2000-RB, dated 3-5-2000 - Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000
3.22
u
FEMA 2/2000-RB, dated 3-5-2000 - Foreign Exchange Management (Issue of Security in India by a Branch, Office or Agency of a Person Resident outside India) Regulations, 2000
3.26
u
FEMA 3(R)/2018-RB, dated 17-12-2018 - Foreign Exchange Management (Borrowing and Lending) Regulations, 2018
3.27
u
FEMA 5(R)/2016-RB, dated 1-4-2016 - Foreign Exchange Management (Deposit) Regulations, 2016
3.45
u
FEMA 6(R)/2015-RB, dated 29-12-2015 - Foreign Exchange Management (Export and Import of Currency) Regulations, 2015
3.64
u
FEMA 8(R)/2026-RB, dated 6-1-2026 - Foreign Exchange Management (Guarantees) Regulations, 2026
3.69
u
FEMA 9(R)/2015-RB, dated 29-12-2015 - Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2015
3.75
u
FEMA 10(R)/2015-RB, dated 21-1-2016 - Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015
3.78
u
FEMA 10A/2014-RB, dated 21-3-2014 - Foreign Exchange Management (Crystallization of Inoperative Foreign Currency Deposits) Regulations, 2014
3.229
u
FEMA 11(R)/2015-RB, dated 29-12-2015 - Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2015
3.91
u
FEMA 12(R)/2015-RB, dated 29-12-2015 - Foreign Exchange Management (Insurance) Regulations, 2015
3.93
u
FEMA 13(R)/2016-RB, dated 1-4-2016 - Foreign Exchange Management (Remittance of Assets) Regulations, 2016
3.95
u
FEMA 14(R)/2023-RB, dated 21-12-2023 - Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023
3.99
u
FEMA 22(R)/2016-RB, dated 31-3-2016 - Foreign Exchange Management (Establishment in India of a Branch Office or a Liaison Office or a Project Office or any other Place of Business) Regulations, 2016
3.189
u
FEMA 23(R)/2026-RB, dated 13-1-2026 - Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026
3.200
u
FEMA 25/2000-RB, dated 3-5-2000 - Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000
3.208
u
FEMA 71/2002-RB, dated 7-9-2002 - Foreign Exchange Management (Offshore Banking Unit) Regulations, 2002
3.223
RBI
CONTENTS
I-14 PAGE
FEMA 101/2003-RB, dated 3-10-2003 - Foreign Exchange Management [Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)] Regulations, 2003
3.225
FEMA 339/2015-RB, dated 2-3-2015 - Foreign Exchange Management (International Financial Services Centre) Regulations, 2015
3.231
u
FEMA 348/2015-RB, dated 25-9-2015 - Foreign Exchange Management (Regularization of Assets held Abroad by a Person Resident in India) Regulations, 2015
3.233
u
FEMA 389/2018-RB, dated 20-3-2018 - Foreign Exchange Management (Cross Border Merger) Regulations, 2018
3.234
u
FEMA 395/2019-RB, dated 17-10-2019 - Foreign Exchange Management (Mode of Payment and Reporting of Non-debt Instruments) Regulations, 2019
3.178
u
FEMA 396/2019-RB, dated 17-10-2019 - Foreign Exchange Management (Debt Instruments) Regulations, 2019
3.171
u
FEMA 399/2020-RB, dated 23-10-2020 - Foreign Exchange Management (Margin for Derivative Contracts) Regulations, 2020
3.243
u
FED 1/DG(SG)-2008, dated 6-8-2008 - Currency Futures (Reserve Bank) Directions, 2008
3.216
u
FMRD.FMD.01/ED(TRS)-2020, dated 20-1-2020 - Currency Futures in International Financial Services Centre (Reserve Bank) Directions, 2020
3.238
u
FMRD.FMD.02/ED(TRS)-2020, dated 20-1-2020 - Currency Options in International Financial Services Centre (Reserve Bank) Directions, 2020
3.240
u
FEMA 400/2022-RB, dated 22-8-2022 - Foreign Exchange Management (Overseas Investment) Regulations, 2022
3.259
u
FEMA 401/2026-RB, dated 30-4-2026 - Foreign Exchange Management (Authorised Persons) Regulations, 2026
3.284
u
DOR. MRG.77/00-00-007/2022-23, dated 11-10-2022 - Reserve Bank of India (Unhedged Foreign Currency Exposure) Directions, 2022
3.265
u
A.P. (DIR Series) (2022-23) Circular No. 21, dated 12-12-2022 - Foreign Exchange Management (Hedging of Commodity Price Risk and Freight Risk in Overseas Markets) Directions, 2022
3.272
A.P. (DIR Series) (2024-25) Circular No. 6, dated 8-5-2024 - Reserve Bank of India (Margin for Derivative Contracts) Directions, 2024
3.276
u
u
u
DIVISION FOUR
NOTIFICATIONS UNDER FEMA 4.1
Notification under section 1(4) of FEMA/Enforcement of Amendments to provisions of FEMA
4.3
4.2
Notification under section 2(h) of FEMA
4.4
4.3
Notification under section 2(za) of FEMA
4.5
4.4
Notifications under section 3 of FEMA
4.6
4.5
Notification under section 6 of FEMA
4.9
4.6
Orders under section 16 of FEMA
4.10
4.7
Notification under section 17 of FEMA
4.12
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CONTENTS PAGE
4.8
Notification under section 18 of FEMA
4.14
4.9
Notification under section 19 of FEMA
4.15
4.10
Notifications under section 36 of FEMA
4.16
4.11
Notifications under section 37A of FEMA
4.18
4.12
Notification under section 38 of FEMA
4.19
4.13
Notification under section 40 of RBI Act
4.20
4.14
Notification under section 47 of FEMA
4.21
4.15
Notification under section 50 of FEMA
4.22
4.16
Removal of Difficulties Order
4.24
DIVISION FIVE
MASTER DIRECTIONS 5.1
Master Direction on Risk Management and Inter-Bank Dealings
5.3
5.2
Master Direction on Opening and Maintenance of Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange Houses
5.34
5.3
Master Direction on Money Changing Activities
5.44
5.4
Master Direction on Compounding of Contraventions under FEMA, 1999
5.63
5.5
Master Direction on External Commercial Borrowings, Trade Credits and Structured Obligations
5.79
5.6
Master Direction on Borrowing and Lending transactions in Indian Rupee between Persons Resident in India and Non-Resident Indians/Persons of Indian Origin
5.96
5.7
Master Direction on Liberalised Remittance Scheme (LRS)
5.103
5.8
Master Direction on other Remittance Facilities
5.118
5.9
Master Direction on Insurance
5.141
5.10
Master Direction on Establishment of Branch Office (BO)/Liaison Office (LO)/Project Office (PO) or any other place of business in India by foreign entities
5.148
5.11
Master Direction on Foreign Investment in India
5.162
5.12
Master Direction on Acquisition or Transfer of Immovable Property under Foreign Exchange Management Act, 1999
5.201
5.13
Master Direction on Remittance of Assets
5.210
5.14
Master Direction on Deposits and Accounts
5.214
5.15
Master Direction on Overseas Investment
5.235
5.16
Master Direction on Export of Goods and Services
5.253
5.17
Master Direction on Import of Goods and Services
5.288
5.18
Master Direction on Reporting under Foreign Exchange Management Act, 1999
5.312
5.19
Master Direction on Miscellaneous
5.415
5.20
Master Direction on Money Transfer Service Scheme (MTSS)
5.421
5.21
Master Direction on Foreign Exchange Management (Hedging of Commodity Price Risk and Freight Risk in Overseas Markets) Directions, 2022
5.430
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DIVISION SIX
MEMORANDUM OF INSTRUCTIONS u
PEM : Memorandum of Instructions on Project Exports and Service Exports
6.3
u
ACM : Memorandum of procedure for channelling transactions through Asian Clearing Union (ACU)
6.68
u
GIM : Revised Instructions under GIM
6.89
u
LIM
6.94
: Revised Instructions under LIM
DIVISION SEVEN
FOREIGN CONTRIBUTIONS 7.1
Foreign Contribution (Regulation) Act, 2010
7.3
7.2
Foreign Contribution (Regulation) Rules, 2011
7.46
7.3
Foreign Contribution (Acceptance or Retention of Gifts or Presentations) Rules, 2012
7.107
7.4
Notifications issued under Foreign Contribution (Regulation) Act, 2010
7.109
7.5
Guidelines issued under section 36(1)(a) of the Banking Regulation Act, 1949 Implementation of the Provisions of Foreign Contribution (Regulation) Act, 2010
7.119
7.6
Guidelines for consideration of proposals for acceptance of foreign hospitality under the Foreign Contribution (Regulation) Act, 2010
7.125
7.7
Standard Operating Procedure (SOP) to open and operate the FCRA Account as provided under section 17(1) of the amended Foreign Contribution (Regulation) Act, 2010 with SBI, New Delhi Main Branch in terms of FCRA (Amendment) Act, 2020
7.134
7.8
Advisory for Compliance by FCRA NGOs/Associations with the Amended Provisions in FCRA, 2010 and FCRR, 2011
7.137
7.9
FAQs on FCRA, 2010
7.139
7.10
Advisory to NGOs on Foreign Funding
7.160
7.11
FCRA Account
7.161
7.12
Unique ID of NGOs Receiving Foreign Contribution
7.167
7.13
Charters
7.168
7.14
Submission of applications for revision of orders under section 32 of the Foreign Contribution (Regulation) Act, 2010, read with rule 20 of the Foreign Contribution (Regulation) Rules, 2011
7.176
Introduction of Foreign Contribution (Regulation) Act (FCRA) related transaction code in NEFT and RTGS Systems
7.178
7.15 7.16
Extension of the validity of FCRA registration certificates
7.180
7.17
Denial/Refusal of Applications of Registration and Renewal - Reasons for Denial/Refusal
7.181
7.18
Public Notices
7.184
7.19
Case Laws Digest
7.191
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DIVISION EIGHT
PREVENTION OF MONEY LAUNDERING 8.1
Prevention of Money Laundering Act, 2002
8.3
8.2
Notifications
8.56
8.3
Prevention of Money-Laundering (the Manner of Forwarding a Copy of the Order of Provisional Attachment of Property along with the Material, and Copy of the Reasons along with the Material in Respect of Survey, to the Adjudicating Authority and its Period of Retention) Rules, 2005
8.4
8.94
Prevention of Money-Laundering (Receipt and Management of Confiscated Properties) Rules, 2005
8.99
8.5
Prevention of Money-Laundering (Maintenance of Records) Rules, 2005
8.102
8.6
Prevention of Money-Laundering (Forms, Search and Seizure or Freezing and the Manner of Forwarding the Reasons and Material to the Adjudicating Authority, Impounding and Custody of Records and the Period of Retention) Rules, 2005
8.134
8.7
Prevention of Money-Laundering (the Forms and the Manner of Forwarding a Copy of Order of Arrest of a Person along with the Material to the Adjudicating Authority and its Period of Retention) Rules, 2005
8.8
8.145
Prevention of Money-Laundering (the Manner of Forwarding a Copy of the Order of Retention of Seized Property along with the Material to the Adjudicating Authority and the Period of its Retention) Rules, 2005
8.9
8.149
Prevention of Money-Laundering (Manner of Receiving the Records Authenticated outside India) Rules, 2005
8.153
8.10
Prevention of Money-Laundering (Appeal) Rules, 2005
8.154
8.11
Adjudicating Authority (Procedure) Regulations, 2013
8.157
8.12
Prevention of Money-Laundering (Appointment and Conditions of Service of Chairperson and Members of Appellate Tribunal) Rules, 2007
8.13
8.171
Prevention of Money-Laundering (Appointment and Conditions of Service of Chairperson and Members of Adjudicating Authorities) Rules, 2007
8.177
8.14
Prevention of Money-Laundering (Issuance of Provisional Attachment Order) Rules, 2013
8.180
8.15
Prevention of Money-Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013
8.182
8.16
Prevention of Money-Laundering (Restoration of Property) Rules, 2016
8.188
DIVISION NINE
EURO ISSUE AND ISSUE OF FOREIGN CURRENCY CONVERTIBLE BONDS/ORDINARY SHARES THROUGH DEPOSITORY RECEIPT MECHANISM/ISSUE OF FOREIGN CURRENCY EXCHANGE BONDS 9.1
Euro Issue
9.3
CONTENTS
I-18 PAGE
9.2
Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993
9.33
9.3
Issue of Foreign Currency Exchangeable Bonds Scheme, 2008
9.49
9.4
Depository Receipts Scheme, 2014
9.52
9.5
Companies (Issue of Global Depository Receipts) Rules, 2014
9.56
DIVISION TEN
ALLIED ACTS/RULES AND GUIDELINES 10.1
Foreign Trade (Development and Regulation) Act, 1992
10.3
10.2
Foreign Trade (Regulation) Rules, 1993
10.20
10.3
Foreign Trade (Exemption from Application of Rules in certain Cases) Order, 1993
10.28
10.4
Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974
10.33
10.5
Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976
10.40
10.6
Smugglers and Foreign Exchange Manipulators (Appellate Tribunal for Forfeited Property) Rules, 1977
10.51
10.7
Appellate Tribunal for Forfeited Property (Procedure) Rules, 1986
10.60
10.8
Appellate Tribunal for Forfeited Property (Fees) Rules, 1987
10.68
10.9
Smugglers and Foreign Exchange Manipulators (Receipt, Management and Disposal of Forfeited Property) Rules, 2006
10.69
10.10
Safeguard Measures (Quantitative Restrictions) Rules, 2012
10.75
DIVISION ELEVEN
FOREIGN DIRECT INVESTMENT POLICY 11.1
Consolidated Foreign Direct Investment Policy
11.3
11.2
Circulars issued in 2017-26
11.75
DIVISION TWELVE
TRIBUNAL, APPELLATE TRIBUNAL AND OTHER AUTHORITIES 12.1
Tribunals Reforms Act, 2021
12.3
12.2
Relevant sections of Finance Act, 2017
12.20
12.3
Tribunal (Conditions of Service) Rules, 2021
12.24
DIVISION THIRTEEN
FEMA & FDI READY RECKONER Acronyms used in FEMA & FDI
13.vii*
CHAPTER 1 :
FEMA - Overview
13.3*
CHAPTER 2 :
Authorised Person
13.11*
CHAPTER 3 :
Accounts in India by person resident out of India
13.24*
*See Volume 2.
I-19
CONTENTS PAGE
CHAPTER 4 :
Accounts of Indian residents in Foreign Currency
13.38*
CHAPTER 5 :
Receipt and payment in foreign exchange
13.49*
CHAPTER 6 :
Realisation, repatriation and surrender of foreign exchange
13.53*
CHAPTER 7 :
Money Changing Activities
13.56*
CHAPTER 8 :
Money Transfer Service Scheme (MTSS)
13.66*
CHAPTER 9 :
Possession and Retention of Foreign Currency
13.71*
CHAPTER 10 :
Export and Import of Currency or Currency Notes
13.73*
CHAPTER 11 :
Remittances on current account
13.77*
CHAPTER 12 :
Liberalised Remittance Scheme (LRS)
13.92*
CHAPTER 13 :
Export of Goods and Services
13.105*
CHAPTER 14 :
Import of Goods and Services
13.146*
CHAPTER 14A : Export and Import of goods and services
13.169*
CHAPTER 15 :
Project exports and Service Exports
13.177*
CHAPTER 16 :
Foreign exchange rates
13.179*
CHAPTER 17 :
Overview of Capital account transactions
13.186*
CHAPTER 18 :
Foreign Investment in India
13.191*
CHAPTER 19 :
FDI in indian company
13.201*
CHAPTER 20 :
Sector wise FDI Policy at a glance
13.224*
CHAPTER 21 :
FDI - Downstream investment i.e. indirect investment
13.233*
CHAPTER 22 :
FDI through rights, bonus, sweat equity or merger/amalgamation
13.240*
CHAPTER 23 :
FDI - Transfer of securities
13.246*
CHAPTER 24 :
FDI in LLP
13.261*
CHAPTER 25 :
FDI in GDR/ADR
13.264*
CHAPTER 26 :
Investment by an individual person resident outside India including NRI and ICI
13.270*
CHAPTER 27 :
FDI in startup company
13.285*
CHAPTER 28 :
Investment by Foreign Portfolio Investor
13.288*
CHAPTER 29 :
FDI in investment vehicle
13.297*
CHAPTER 30 :
FDI by FVCI
13.300*
CHAPTER 31 :
FDI - Investment in securities by Funds, Foreign Central Bank etc.
13.303*
CHAPTER 32 :
Overseas Investment by Indian Entity
13.305*
CHAPTER 33 :
Guarantees
13.346*
CHAPTER 34 :
Insurance
13.349*
CHAPTER 35 :
Borrowing and Lending in Foreign Exchange
13.357*
CHAPTER 36 :
Borrowing and Lending in Indian Rupees between Person resident in India and NRI/PIO
13.366*
*See Volume 2.
CONTENTS
I-20 PAGE
CHAPTER 37 :
Foreign Investment in Debt Instruments
13.377*
CHAPTER 38 :
External Commercial Borrowings
13.390*
CHAPTER 39 :
Trade Credit
13.399*
CHAPTER 40 :
Acquisition and transfer of Immovable property in India
13.405*
CHAPTER 41 :
Acquisition and Transfer of Immovable Property outside India
13.411*
CHAPTER 42 :
Remittance of Assets
13.414*
CHAPTER 43 :
Branch/LO/Project Office in India by foreign entities
13.418*
CHAPTER 44 :
Indian Depository Receipts
13.434*
CHAPTER 45 :
Risk Management and Inter-Bank Dealings
13.441*
CHAPTER 46 :
Vostro Account for international trading
13.447*
CHAPTER 47 :
Industrial Policy of Government of India
13.452*
CHAPTER 48 :
Enforcement of FEMA
13.458*
CHAPTER 49 :
Penalties under FEMA
13.461*
CHAPTER 50 :
Appeals under FEMA
13.467*
CHAPTER 51 :
Compounding of Contraventions under FEMA
13.470*
CHAPTER 52 :
Prevention of Money Laundering Act
13.478*
CHAPTER 53 :
Foreign Contribution (Regulation) Act (FCRA)
13.518*
CHAPTER 54 :
COFEPOSA, 1974
13.547*
CHAPTER 55 :
International Financial Services Centre (IFSC)
13.561*
SUBJECT INDEX
13.585*
DIVISION FOURTEEN
FEMA CASE LAWS DIGEST 14.1
FEMA 1999
14.3*
14.2
Foreign Exchange Regulation Act, 1973
14.31*
DIVISION FIFTEEN
RBI s CIRCULARS & CLARIFICATIONS (2000-2026) 15.1
List of RBI s Circulars & Clarifications (2000-2026)
15.2
Text of Relevant Circulars & Clarifications (2000-2026)
SUBJECT INDEX
*See Volume 2.
15.3* 15.255* i-xlviii
3.7 FOREIGN EXCHANGE MANAGEMENT (BORROWING AND LENDING) REGULATIONS, 2018* [SUPERSESSION OF NOTIFICATION NO. FEMA 3/2000-RB, DATED 3-5-2000, NOTIFICATION NO. FEMA 4/2000-RB, DATED 3-5-2000 AND REGULATION 21 OF NOTIFICATION NO. FEMA 120/RB-2004, DATED 7-7-2004]
FEMA 3(R)/2018-RB, dated 17-12-2018 [G.S.R. 1213(E), dated 17-12-2018] - In exercise of the powers conferred by clauses (a), (d) and (e) of sub-section (3) of section 6 1, sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999) and in supersession of Notification No. FEMA 3/2000-RB dated May 3, 2000, as amended from time to time, Notification No. FEMA 4/2000-RB dated May 3, 2000, as amended from time to time and Regulation 21 of Notification No. FEMA 120/RB-2004 dated July 7, 2004 as amended from time to time, the Reserve Bank makes the following regulations for borrowing and lending between a person resident in India and a person resident outside India, namely: Short Title and Commencement. 1.
(i) These Regulations may be called the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018.
(ii) They shall come into force from the date of their publication in the Official Gazette. 2
[Definitions.
2.
(1) In these regulations, unless the context otherwise requires:
(a) “Act” means the Foreign Exchange Management Act, 1999 (42 of 1999); *SUPERSEDED FOREIGN EXCHANGE MANAGEMENT (BORROWING OR LENDING IN FOREIGN EXCHANGE) REGULATIONS, 2000/FOREIGN EXCHANGE MANAGEMENT (BORROWING AND LENDING IN RUPEES) REGULATIONS, 2000 MASTER DIRECTION : External Commercial Borrowings, Trade Credits and Structured Obligations [No. 5/2018-19, dated 26-3-2019]. 1. Section 6(3) is omitted by the Finance Act, 2015, w.e.f. 15-10-2019. Section 47(3), with effect from 15-10-2019, provides that all Regulations/Master Directions issued by RBI prior to omission of section 6(3), i.e., 15-10-2019, shall continue to be valid until amended or rescinded by the Central Government. 2. Substituted by the FEM (Borrowing and Lending) (First Amendment) Regulations, 2026, w.e.f. 9-2-2026. Prior to its substitution, regulation 2 read as under : ‘2. Definitions.—In these regulations, unless the context otherwise requires— (i) “Act” means the Foreign Exchange Management Act, 1999 (42 of 1999); (ii) “Authorised Dealer (AD)” means a person authorised as an Authorised Dealer under sub-section (1) of section 10 of the Act; (iii) “EEFC Account”, “RFC Account” shall have the same meaning as assigned to them respectively in the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015, as amended from time to time; (Contd. on page 3.28)
3.27
Reg. 2
FEM (BORROWING AND LENDING) REGULATIONS, 2018
3.28
(Contd. from page 3.27)
(iv) “External Commercial Borrowings (ECB)” means borrowing by an eligible resident entity from outside India in accordance with framework decided by the Reserve Bank in consultation with the Government of India; (v) “External Commercial Lending (ECL)” means lending by a person resident in India to a borrower outside India in accordance with framework decided by the Reserve Bank in consultation with the Government of India; (vi) “Foreign Exchange” shall have the same meaning assigned to it in the Act; (vii) “Foreign branches/subsidiaries of the Indian banks” means entities established overseas in terms of provisions contained in the Banking Regulation Act, 1949, as amended from time to time; (viii) ‘Authorised Bank’, ‘Non-resident Indian (NRI)’, ‘FCNR (B) Account’, ‘NRO Account’, and ‘NRE Account’ shall have the same meanings as assigned to them respectively in the Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time to time; (ix) “Housing Finance Institution” and “National Housing Bank” shall have the same meaning as assigned to them in the National Housing Bank Act, 1987, as amended from time to time; (x) “Indian Entity” means a company incorporated in India under the Companies Act, 2013, as amended from time to time, or a Limited Liability Partnership formed and registered in India under the Limited Liability Partnership Act, 2008, as amended from time to time; (xi) “Overseas Citizen of India (OCI)” Cardholder shall have the same meaning as assigned to it under section 7(A) of the Citizenship Act, 1955, as amended from time to time; (xii) “Real Estate Activity” means any activity involving own or leased property for buying, selling and renting of commercial and residential properties or land and also includes activities either on a fee or contract basis assigning real estate agents for intermediating in buying, selling, letting or managing real estate. However, this would not include development of integrated township, purchase/ long term leasing of industrial land as part of new project/modernisation or expansion of existing units or any activity under ‘infrastructure sub-sectors’ as given in the Harmonised Master List of Infrastructure sub-sectors approved by the Government of India vide Notification F. No. 13/06/2009-INF, as amended/updated from time to time; (xiii) “Relative” shall have the same meaning as assigned to it in the Companies Act, 2013, as amended from time to time; (xiv) “Restricted End Uses” shall mean end uses where borrowed funds cannot be deployed and shall include the following: (a) In the business of chit fund or Nidhi Company; (b) Investment in capital market including margin trading and derivatives; (c) Agricultural or plantation activities; (d) Real estate activity or construction of farm houses; and (e) Trading in Transferable Development Rights (TDR), where TDR shall have the meaning as assigned to it in the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2015; (xv) “Schedule” means the Schedule to these Regulations; (xvi) “Start-up” means an entity which complies with the conditions laid down in Notification No. G.S.R. 180(E) dated February 17, 2016, as amended/updated from time to time, issued by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India; (xvii) “Trade Credit” refer to the credits extended by the overseas supplier, bank/financial institution for imports into India in accordance with the Trade Credit framework decided by the Reserve Bank in consultation with the Government of India. Explanation.—Depending on the source of finance, such trade credits include both suppliers’ credit and buyers’ credit. Suppliers’ credit relates to the credit for imports into India extended by the overseas supplier, while buyers’ credit refers to loans for payment of imports into India arranged by the importer from overseas bank or financial institution. Imports should be as permissible under the extant Foreign Trade Policy of the Director General of Foreign Trade (DGFT). (xviii) The words and expressions used but not defined in these Regulations shall have the same meaning respectively assigned to them in the Act.’
3.29
DEFINITIONS
Reg. 2
(b) “arm’s length basis” means a transaction between two related parties that is conducted as if the transacting parties were unrelated, so that there is no conflict of interest; (c) “Authorised Bank” shall have the same meaning as assigned to it in the Foreign Exchange Management (Deposit) Regulations, 2016; (d) “Authorised Dealer (AD)” means a person authorised as an Authorised Dealer under sub-section (1) of section 10 of the Act; (e) “benchmark rate” means any widely accepted interbank rate or Alternative Reference Rate (ARR) of 6-month tenor, applicable to the currency of borrowing, in case of foreign currency (FCY) external commercial borrowing (ECB)/trade credit (TC). Further, it means prevailing yield of the Government of India security of corresponding maturity in case of Indian Rupees (INR) denominated ECB/TC; (f) “control”— (i) in case of companies, control shall have the same meaning as assigned to it in the Companies Act, 2013; and (ii) in case of LLPs, control means the right to appoint majority of the designated partners, where such partners, with specific exclusion to others have control over all the policies of the LLP; (g) “cost of borrowing” means rate of interest, other fees, expenses, charges, guarantee fees and export credit agency charges, whether paid in FCY or INR, but shall not include commitment fees and statutory taxes payable in India; (h) “Designated Authorised Dealer (AD) Category I Bank” means the AD Category I bank designated by the borrower for meeting the reporting requirements in respect of ECB and TC and monitoring of such transactions; (i) “exchange earners” foreign currency (EEFC) account” shall have the same meaning as assigned to it in the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015; (j) “external commercial borrowing (ECB)” means borrowing by an eligible borrower from a recognised lender in accordance with Schedule I to these Regulations; (k) “external commercial lending (ECL)” means lending by a person resident in India to a person resident outside India in accordance with Schedule III to these Regulations; (l) “Foreign Currency Non-Resident (Bank) (FCNR (B)) account” shall have the same meanings as assigned to it in the Foreign Exchange Management (Deposit) Regulations, 2016; (m) “financial sector regulator” means a financial regulatory body established under any law in force in India and includes the Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India and Pension Fund Regulatory and Development Authority; (n) “foreign currency convertible bond (FCCB)” shall have the same meaning as assigned to it in the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993; (o) “foreign currency exchangeable bond (FCEB)” shall have the same meaning as assigned to it in the Issue of Foreign Currency Exchangeable Bonds Scheme, 2008; (p) “Housing Finance Institution” shall have the same meaning as assigned to it in the National Housing Bank Act, 1987 (53 of 1987);
Reg. 2
FEM (BORROWING AND LENDING) REGULATIONS, 2018
3.30
(q) “Indian Entity” means a company incorporated in India under the Companies Act, 2013 (18 of 2013) or a body corporate established in India under a Central / State Act or a Limited Liability Partnership formed and registered in India under the Limited Liability Partnership Act, 2008; (r) “Industrial Park” means a project in which quality infrastructure in the form of plots of developed land or built-up space or a combination with common facilities is developed and made available to all the allottee units for the purpose of industrial activity. Explanation.—Common Facilities refers to facilities available for all the units located in the industrial park, and include facilities of power, roads (including approach roads), railway line/ sidings including electrified railway lines and connectivity to the main railway line, water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/conference halls, parking, travel desks, security service, first aid centre, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park; (s) “infrastructure sector” shall have the same meaning as assigned to it in the ‘Harmonised Master List of Infrastructure Sub-Sectors’ approved by Government of India vide Notification F. No. 13/ 06/2009-INF and as amended from time to time. For the purpose of these regulations, “Exploration, Mining and Refinery” sectors will be deemed as infrastructure sector; (t) “International Financial Service Centre (IFSC)” shall have the same meaning as assigned to it under the International Financial Services Centres Authority Act, 2019 (50 of 2019); (u) ‘Liberalised Remittance Scheme’ means the scheme formulated in terms of circular A.P. (DIR Series) Circular No. 64 dated February 4, 2004; (v) “Non-Resident External (NRE) Account” shall have the same meaning as assigned to it in the Foreign Exchange Management (Deposit) Regulations, 2016; (w) “Non-Resident Ordinary (NRO) Account” shall have the same meaning as assigned to it in the Foreign Exchange Management (Deposit) Regulations, 2016; (x) “National Housing Bank” shall have the same meaning as assigned to it in the National Housing Bank Act, 1987 (53 of 1987); (y) “net worth”— (i) In case of companies, net worth shall have the same meaning as assigned to it in the Companies Act, 2013 (18 of 2013); and (ii) In case of other entities, net worth shall be the sum of the funds recorded in the balance sheet under capital and undistributed profits after deducting therefrom the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the last audited balance sheet; (z) “Non-Resident Indian (NRI)” shall have the same meanings as assigned to it in the Foreign Exchange Management (Deposit) Regulations, 2016; (aa) “Overseas Citizen of India (OCI) Cardholder” shall have the same meaning as assigned to it in the Citizenship Act, 1955; (ab) “real estate business” means purchase, sale or lease of land or immovable property with a view to earning profit from there and does not include purchase, sale and lease (not amounting to transfer) of land or immovable property for the following purposes: (i) construction and development of industrial parks, integrated townships and SEZ; (ii) development of new industrial project, modernisation and expansion of existing units;
3.31
PROHIBITION TO BORROW OR LEND
Reg. 3
(iii) any activity under ‘infrastructure sector’; (iv) construction-development project; (v) commercial or residential properties for own use of the borrower; (vi) real estate broking services. Explanation.— (a) Construction-development projects includes development of townships, construction of residential/commercial premises, roads or bridges, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure, townships; (b) Transfer, in relation to real estate business includes,— (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or (iv) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (v) any transaction, by acquiring capital instruments in a company or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of, any immovable property; (ac) “related party” means an entity which qualifies as a related party as per the provisions of the Companies Act, 2013 (18 of 2013). For a person other than a company, this definition shall apply mutatis mutandis; (ad) “relative” shall have the same meaning as assigned to it in the Companies Act, 2013 (18 of 2013); (ae) “securities” shall have the same meaning as assigned to it in the Securities Contracts (Regulation) Act, 1956; (af) “Special Economic Zone (SEZ) shall have the same meaning as assigned to it in the Special Economic Zones Act, 2005; (ag) “Special Non-Resident Rupee Account (SNRR) account” shall have the same meanings as assigned to it in the Foreign Exchange Management (Deposit) Regulations, 2016; (ah) “trade credit (TC)” means credit extended by the overseas supplier or financial institution for permissible imports into India and includes both suppliers’ credit and buyers’ credit; Explanation.—Suppliers’ credit relates to the credit for imports into India extended by the overseas supplier, while buyers’ credit refers to loans for payment of imports into India arranged by the importer from an overseas bank or financial institution; (ai) “transferable development rights” shall have the same meaning as assigned to it in the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000. (2) The words and expressions used but not defined in these Regulations shall have the same meaning respectively assigned to them in the Act.] Prohibition to Borrow or Lend. Save as otherwise provided in the Act, Rules or Regulations made thereunder, no person resident in India shall borrow or lend in foreign exchange from or to a person resident in or outside India and no person resident in India shall borrow in rupees from, or lend in rupees to, a person resident outside India: 3.
Reg. 3A
FEM (BORROWING AND LENDING) REGULATIONS, 2018
3.32
Provided that the Reserve Bank may, for sufficient reasons, permit a person resident in India to borrow or lend in foreign exchange from or to a person resident in or outside India and/or permit a person resident in India to borrow in rupees from, or lend in rupees to, a person resident outside India. Explanation.—Use of Credit Card (a) in India by a person resident outside India or (b) outside India by a person resident in India shall not be deemed as borrowing or lending in Indian Rupee/foreign exchange. 3
[Restriction on end-use of borrowed funds:-
3A. Funds borrowed in terms of these Regulations shall not be utilised for the following purposes in India: (a) Chit funds; (b) Nidhi Company; (c) Real estate business and construction of farmhouses, provided that: (i) in case of a borrowing for construction-development project, the borrower shall sell plots only after ensuring development of trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage. (ii) in case of borrowing for industrial parks, such parks shall comprise of a minimum of 10 units with no single unit occupying more than 50 per cent of the allocable area and the minimum percentage of the area to be allocated for industrial activity shall not be less than 66 per cent of the total allocable area. Explanation.—"Allocable area" in the Industrial Park means— (i) in the case of plots of developed land - the net site area available for allocation to the units, excluding the area for common facilities. (ii) in the case of built-up space - the floor area and built-up space utilized for providing common facilities. (iii) in the case of a combination of developed land and built-up space - the net site and floor area available for allocation to the units excluding the site area and built-up space utilized for providing common facilities. (d) Agricultural and animal husbandry, except— (i) Floriculture, horticulture and cultivation of vegetables and mushrooms under controlled conditions; (ii) Development and production of seeds and planting material; (iii) Animal husbandry (including breeding of dogs), pisciculture, aquaculture and apiculture; and (iv) Services related to agro and allied sectors. Explanation.—The term ‘under controlled conditions’ covers the ‘cultivation under controlled conditions’ for the categories of floriculture, horticulture, cultivation of vegetables and mushrooms which is the practice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where micro-climatic conditions are regulated anthropogenically. (e) Plantation except tea, coffee, rubber, cardamom, palm oil tree, olive oil tree plantation. 3. Inserted by the FEM (Borrowing and Lending) (First Amendment) Regulations, 2026, w.e.f. 9-2-2026.
3.33
BORROWING FROM OUTSIDE INDIA IN FE
Reg. 4
(f) Trading in Transferable Development Rights (TDR); (g) Transacting in listed/unlisted securities, except for transactions undertaken by an Indian entity for corporate actions such as merger, demerger, amalgamation, arrangement, or acquisition of control in accordance with the Act under which the entity is incorporated/established, Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Insolvency and Bankruptcy Code, 2016, as applicable; Explanation: For sub-regulation 1(g), borrowing shall be availed for strategic purposes only, i.e. those driven by the core objective of creating long-term value through potential synergies, rather than for short-term gains; (h) Repayment of a domestic INR loan (i) which was availed for an end-use restricted under this regulation; or (ii) which is classified as a non-performing asset (NPA) as per the applicable prudential norms; (i) On-lending for any of the purposes for which funds cannot be borrowed and utilised in this regulation.] 4.
Borrowing from outside India in Foreign Exchange by a Person Resident in India:— A. Borrowing by an Authorised Dealer or its branch outside India (i) An AD may borrow from its Head Office or branch or correspondent outside India or any other entity up to limit specified and subject to terms and conditions as specified by the Reserve Bank from time to time, in consultation with Government of India. (ii) A branch outside India of an AD being a bank incorporated or constituted in India, may borrow in foreign exchange in the normal course of its banking business from outside India, subject to the directions or guidelines issued by the Reserve Bank from time to time, and the Regulatory Authority of the country where the branch is located. (iii) An AD may borrow in foreign exchange from a bank or a financial institution outside India, for the purpose of granting pre-shipment or post-shipment credit in foreign exchange to its exporter constituent, subject to compliance with the guidelines issued by the Reserve Bank in this regard. (iv) An AD may raise ECB from outside India in accordance with the provisions contained in Schedule I.
B. Borrowing by Persons other than Authorised Dealers (i) Eligible resident entities may raise ECB from outside India in accordance with the provisions contained in Schedule I. (ii) Trade Credit may be raised from outside India by importers for import of capital or noncapital goods as permissible under the extant Foreign Trade Policy of the DGFT in accordance with the provisions contained in Schedule II. (iii) A person resident in India may borrow, whether by way of loan or overdraft or any other credit facility, from a bank situated outside India, where export of goods or services is proposed to be made on deferred payment terms or in execution of a turnkey project or a civil construction contract, provided the terms and conditions stipulated by the authority which has granted the approval to the arrangement are in accordance with the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015, notified vide Notification No. FEMA 23(R)/2015-RB dated January 12, 2016, as amended from time to time.
Reg. 6
FEM (BORROWING AND LENDING) REGULATIONS, 2018
3.34
(iv) Financial Institutions, set up under an Act of the Indian Parliament, may raise foreign exchange borrowings with the prior approval of the Government of India for the purpose of onward lending. Explanation.—Such borrowings, which are in the nature of ECB, shall be subject to provisions contained in Schedule I. (v) An individual resident in India may borrow a sum not exceeding USD 2,50,000 or its equivalent, or any other amount as decided by the Reserve Bank from time to time, from his/her relatives outside India and subject to such terms and conditions as specified by the Reserve Bank from time to time in consultation with the Government of India. (vi) An individual resident in India studying abroad may raise loan outside India not exceeding USD 2,50,000 or its equivalent, or any other amount as decided by the Reserve Bank from time to time, for the purposes of payment of education fees abroad and maintenance subject to terms and conditions as specified by the Reserve Bank from time to time in consultation with the Government of India. 5.
Lending in Foreign Exchange by a Person Resident in India:— A. Lending by an Authorised Dealer in India or its branch outside India (i) An AD in India or its branch outside India may extend foreign currency denominated ECL to a borrower outside India in accordance with the provisions contained in Schedule III. (ii) An AD may grant loans to its constituents in India for meeting their foreign exchange requirements or for their rupee working capital requirements or capital expenditure subject to compliance with prudential norms, interest rate directives and guidelines, if any, issued by Reserve Bank in this regard. (iii) Subject to the directions or guidelines issued by the Reserve Bank from time to time, an AD in India may extend foreign exchange loans to another AD in India. (iv) Branches outside India of AD banks may extend foreign exchange loans against the security of funds held in NRE/ FCNR deposit accounts or any other account as specified by the Reserve Bank from time to time, maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016, notified vide Notification No. FEMA 5(R)/2016-RB dated April 1, 2016, as amended from time to time.
B. Lending by persons other than Authorised Dealer Eligible resident entity may extend foreign currency denominated ECL to a borrower outside India in accordance with the provisions contained in Schedule III. 6.
Borrowing in Indian Rupees by a Person Resident in India:— A. Borrowing by an Authorised Dealer An AD may raise Rupee denominated ECB from outside India in accordance with the provisions contained in Schedule I.
B. Borrowing by persons other than Authorised Dealer (i) Eligible resident entities may raise Rupee denominated ECB from outside India in accordance with the provisions contained in Schedule I. (ii) Eligible resident entities, as defined by the Government of India, may borrow from overseas Multilateral Financial Institutions/International Development Financial Institutions, where the source of funds of such institutions is Rupee denominated bonds issued overseas or resources raised domestically, or any other source as approved by the Government of India.
3.35
LENDING IN INDIAN RUPEES
Reg. 7
(iii) Trade Credit may be raised from outside India in Indian Rupees by importers for import of capital or non-capital goods as permissible under the extant Foreign Trade Policy of the DGFT in accordance with the provisions contained in Schedule II. (iv) Any foreign investment in the nature of debt arising out of transfer or issue of security, not covered under the above sub-regulations, should be in compliance with Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, notified vide Notification No. FEMA 20(R)/2017-RB dated November 7, 2017, as amended from time to time. (v) Any person resident in India accepting any deposit from, or making any deposit with, a person resident outside India, including loans/overdrafts against security of funds held in such accounts, should be in compliance with Foreign Exchange Management (Deposit) Regulations, 2016, notified vide Notification No. FEMA 5(R)/2016-RB dated April 1, 2016, as amended from time to time. [(vi) A person resident in India being an individual may borrow in INR from an NRI or a relative who is an OCI cardholder for utilization in India, subject to the following terms and conditions:
4
(a) The amount of loan should be received either by inward remittance from outside India or by debit to NRE/NRO/FCNR(B)/SNRR account of the lender; and (b) Borrowing shall be on non-repatriation basis; i.e. payment of interest and repayment of principal shall be made only to the NRO account of the lender.] (vii) Financial Institutions, set up under an Act of the Indian Parliament, may raise Rupee denominated borrowings from outside India with the prior approval of the Government of India for the purpose of onward lending. Explanation.—Such borrowings which are in the nature of ECBs shall be subject to provisions contained in Schedule I. 7.
Lending in Indian Rupees by a Person Resident in India:— A. Lending by an Authorised Dealer (i) An AD in India may grant loan to a NRI/OCI Cardholder for meeting the borrower's personal requirements/own business purposes/acquisition of a residential accommodation in India/ acquisition of motor vehicle in India/or for any purpose as per the loan policy laid down by the Board of Directors of the AD and in compliance with prudential guidelines of Reserve Bank of India. The AD bank should ensure that the borrowed funds are not used for restricted end uses. (ii) Overdraft in rupee account maintained with AD in India by a bank outside India: An AD may permit a temporary overdraft, for value not exceeding Rupees 5 billion or any other amount as prescribed by the Reserve Bank from time to time, in rupee accounts maintained with it by its overseas branch or correspondent or Head Office outside India, subject to such terms and conditions as the Reserve Bank may direct from time to time.
4. Substituted by the FEM (Borrowing and Lending) (First Amendment) Regulations, 2026, w.e.f. 9-2-2026. Prior to its substitution, sub-regulation (vi) read as under : “(vi) A person resident in India, not being a company incorporated in India, may borrow in Indian Rupees from a NRI/Relatives who are OCI Cardholders outside India, subject to such terms and conditions as specified by the Reserve Bank from time to time in consultation with the Government of India. The borrower should ensure that the borrowed funds are not used for restricted end uses.”
Reg. 8
FEM (BORROWING AND LENDING) REGULATIONS, 2018
3.36
[(iii) An AD in India may lend to a person resident outside India for making margin payments in respect of settlement of transactions involving Government Securities by the person resident outside India, subject to such terms and conditions as may be specified by the Reserve Bank.
5
Explanation.—The expression ‘Government Security’ shall have the same meaning as assigned to it in section 2(f) of Government Securities Act, 2006, and the word ‘securities’ shall be construed accordingly.] [(iv) An AD bank may lend in Indian Rupees to a person resident outside India being a resident in Bhutan, Nepal or Sri Lanka, including a bank in these jurisdictions, for cross border trade transactions.]
6
B. Lending by persons other than Authorised Dealer (i) A registered non-banking financial company in India or a registered housing finance institution in India or any other financial institution as may be specified by the Reserve Bank from time to time, may provide housing loan or vehicle loan, as the case may be, to a NRI/OCI Cardholder subject to such terms and conditions as prescribed by the Reserve Bank from time to time. The borrower should ensure that the borrowed funds are not used for restricted end uses. (ii) An Indian entity may grant loan in Indian Rupees to its employee who is a NRI/OCI Cardholder in accordance with the Staff Welfare Scheme subject to such terms and conditions as prescribed by the Reserve Bank from time to time. The borrower should ensure that the borrowed funds are not used for restricted end uses. (iii) A resident individual may grant Rupee loan to a NRI/OCI Cardholder relative within the overall limit under the Liberalised Remittance Scheme subject to such terms and conditions as prescribed by the Reserve Bank from time to time. The borrower should ensure that the borrowed funds are not used for restricted end uses. [Borrowing and lending by persons resident outside India.
7
7A. A person resident outside India may undertake repo or reverse repo transactions in Rupees to borrow or lend money, subject to such terms and conditions as may be specified by the Reserve Bank. Explanation.— Repo shall have the same meaning as defined in section 45U(c) of RBI Act, 1934. Reverse Repo shall have the same meaning as defined in section 45U(d) of RBI Act, 1934.] 8.
Continuation of loan in the event of change in the residential status of the lender/borrower: (i) An authorised dealer/authorised bank, may allow continuance of loans granted to a resident individual who subsequently becomes a person resident outside India, subject to such terms and conditions as specified by the Reserve Bank from time to time.
(ii) In case a loan was granted by a resident individual to another resident individual and the lender subsequently becomes a non-resident, the repayment of the loan by the resident borrower should be made by credit to the NRO account or any other account of the lender maintained with a bank in India as specified by the Reserve Bank from time to time, at the option of the lender. 5. Inserted by the FEM (Borrowing and Lending) (Amendment) Regulations, 2021, w.e.f. 24-5-2021. 6. Inserted by the FEM (Borrowing and Lending) (Amendment) Regulations, 2025, w.e.f. 6-10-2025. 7. Inserted by the FEM (Borrowing and Lending) (Amendment) Regulations, 2019, w.e.f. 26-2-2019.
3.37
EXTERNAL COMMERCIAL BORROWING (ECB) FRAMEWORK
Sch. I
(iii) In case a loan was granted by a NRI/OCI Cardholder to a person resident in India in accordance with the provisions contained in these regulations and the lender subsequently becomes a resident, the repayment of the loan may be made to the designated account of the lender maintained with a bank in India as specified by the Reserve Bank from time to time, at the option of the lender. (iv) A resident individual will be permitted to service loans taken overseas earlier as a person resident outside India subject to terms and conditions and limit as specified by the Reserve Bank from time to time. 9.
Any borrowing under erstwhile regulations can be continued as permitted up to the due date of repayment. 8
[SCHEDULE I
[See Regulations 4(A)(iv), 4(B)(i), 4(B)(iv), 6(A), 6(B)(i), 6(B)(vii)] External Commercial Borrowing (ECB) Framework Eligible borrowers 1. (1) Any person resident in India (other than an individual) that is incorporated, established or registered under a Central or State Act is an eligible borrower, subject to the condition that such person is permitted for ECB in terms of applicable Act(s). (2) An eligible borrower that is under a restructuring scheme or corporate insolvency resolution process may raise ECB only if specifically permitted under the restructuring or resolution plan. (3) An eligible borrower against whom any investigation, adjudication or appeal by a law enforcement agency for contravention of any rule, regulation or direction issued under the Act is pending, may raise ECB notwithstanding the pending investigation or adjudication or appeal and without prejudice to the outcome of such investigation or adjudication or appeal. The borrower shall, however, disclose information about the pending investigation, adjudication or appeal under ‘Form ECB 1’ (or ‘Revised Form ECB 1’ in case there is existing ECB). Recognised lenders 2. An eligible borrower may raise ECB from— (a) A person resident outside India; (b) A branch outside India of an entity whose lending business is regulated by the Reserve Bank; and (c) A financial institution or a branch of a financial institution set up in IFSC. Explanation.—For the purpose of this paragraph, financial institution shall have the same meaning as assigned to it under the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015. Currency of borrowing 3. (1) An eligible borrower may raise ECB denominated in foreign currency (FCY) or Indian Rupee (INR). (2) Currency of ECB may be changed from one FCY to another FCY, an FCY to INR and INR to an FCY.
8. Substituted by the FEM (Borrowing and Lending) (First Amendment) Regulations, 2026, w.e.f. 9-2-2026. Earlier, Schedule I was amended by the FEM (Borrowing and Lending) (Third Amendment) Regulations, 2022, w.e.f. 28-7-2022.
Foreign Exchange Management Manual with FEMA and FDI Ready Reckoner & FEMA Case Laws Digest AUTHOR : PUBLISHER : DATE OF PUBLICATION : EDITION : ISBN NO : No. of Pages : BINDING TYPE :
Taxmann’s Editorial Board Taxmann August 2026 48th Edition | August 2026 9788167010124 3152 Paperback
Rs. 7,295 DESCRIPTION Foreign Exchange Management Manual is the definitive single-source compendium on India’s foreign exchange law—the standard desk reference across forty-eight editions, and this Edition absorbs the most substantial rewrite of India’s exchange-control machinery in over two decades. Indian exchange control is unusually layered: • The Foreign Exchange Management Act 1999 is only a compact enabling statute • The operative law lives beneath it—Central Government Rules, RBI Regulations and Directions, 21 Master Directions, A.P. (DIR Series) Circulars, DPIIT Press Notes and the Consolidated FDI Policy, and six decades of precedent back through FERA 1973 • No single instrument states the law—most answers sit at the intersection of four or five, and often turn on whether a circular was incorporated into a Master Direction or superseded This Manual is built precisely for that problem. • It reproduces the annotated text of FEMA 1999 with 40 Rules and Regulations, 16 heads of Notifications, 21 Master Directions and 4 Memoranda of Instructions • It adds the allied regimes that travel with foreign exchange work—FCRA 2010, PMLA 2002, the Consolidated FDI Policy, FTDR Act 1992, COFEPOSA and SAFEMA What separates this Manual from a conventional bare-act compilation is its second volume, which does not repeat the law but operationalises it through three purpose-built research instruments: • FEMA & FDI Ready Reckoner—56 chapters and over 1,060 numbered paragraphs, every proposition footnoted to its governing Master Direction paragraph, Regulation or Circular • FEMA Case Laws Digest—858 decisions arranged section-wise across FEMA 1999 and FERA 1973, spanning 1963 to 2026, from the Supreme Court, fourteen High Courts and the tribunals • RBI Circulars & Clarifications Register (2000–2026)—1,613 serially numbered circulars, each flagged as incorporated or superseded, with the full text of those still operationally relevant The result is a reference that works in both directions: from the provision to the practice, and from the practical question back to the authority. This Manual is written for professionals whose work is decided by the precise text of an exchange-control instrument—and by the judicial gloss placed on it. • Chartered Accountants, Company Secretaries and Cost Accountants • Advocates and Law Firms • Authorised Dealer Banks and Authorised Persons • Chief Financial Officers, Treasury Heads and In-house Legal & Compliance Teams • Foreign Investors, FPIs, FVCIs, AIFs and Investment Vehicles • NRIs, OCIs and Persons of Indian Origin • Officers of the Reserve Bank of India, the Directorate of Enforcement and DPIIT • NGOs, Trusts, Societies and Section 8 Companies • IFSC/GIFT City participants • Academics, Researchers and Aspirants The Present Publication is the 48th Edition | August 2026, amended up to 15th July 2026. This book is edited/authored by Taxmann’s Editorial Board, with the following noteworthy features: • [Master Directions Genuinely Updated—and Dated] o All 21 reproduced, 20 carrying an ‘[As amended upto …]’ stamp o Amendments inside a Direction are footnoted the same way, with the earlier wording beneath • [Annotated, Not Merely Reproduced] o 684 amendment footnotes—315 substitutions, 308 insertions, 61 omissions—each with its instrument and effective date o 259 places where the pre-amendment text is reproduced in full o Disputes are decided by the law in force on the transaction date, not the hearing date • [The FEMA Glossary—A Consolidated Definitions Table] o 230+ defined terms in four columns—serial number, expression, definition and the exact Section, Rule or Regulation o Every variant meaning set side by side with its source; ‘Applicant’ alone carries three o Footnoted to more than thirty instruments, including all three 2026 Regulations • [FEMA & FDI Ready Reckoner—56 Chapters, Over 1,060 Paragraphs] o Written as answers—limits, eligibility, prohibited purposes, documentation, time limits and reporting stated directly, authority cited inline o Its own Acronyms table and Subject Index, keyed to paragraphs rather than pages o Chapter 20 cross-maps every sector to both the Schedule I serial of the Non-debt Instruments Rules 2019 and the Consolidated FDI Policy paragraph • [Section-wise FEMA Case Laws Digest—858 Decisions, 1963 to 2026] o 237 under FEMA 1999 across 26 section-heads; 621 under FERA 1973 across 46 o The Supreme Court, fourteen High Courts and the tribunals where most matters are decided, which together outnumber any single court o 30 decisions reported in 2024, 33 in 2025 and 17 in 2026, each with parallel citations • [RBI’s Circulars & Clarifications—A Status Register, Not Just a List] o 1,613 serially numbered circulars, from the 2000-01 series to 2026-27 o Over 540 incorporated into a Master Direction, over 320 into a Master Circular and over 950 superseded—each pointing to the successor text o The register shows not merely what a circular said, but whether it still says it • [A Separate, Fuller FCRA Case Laws Digest] o 23 decisions in law-report format—headnote, FACTS and HELD o 1991 to 2024, across the Supreme Court and the Delhi, Madras, Kerala and Calcutta High Courts • [Multi-Route Finding Architecture] o Eight indexed entry points—Basic Notifications (92), Amending (54), chronological List (541), PMLA Notifications, Master Directions (21), FDI Circulars and Press Notes (30), Prescribed Forms (61) and two Subject Indexes o All 40 Rules and Regulations listed three ways—serially, alphabetically and chronologically o Each volume reprints both volumes’ Contents—either book alone locates anything in the set • [Editorial Apparatus Built for Verification] o Superseded instruments named in a footnote at the head of their replacement o Master Directions carry date stamps; circulars carry an incorporation or supersession status o Amendments carry their instrument and effective date, with the superseded text beneath
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