FEMA (Non-debt Instruments) (Second Amendment) Rules

Foreign Exchange Management (FEMA) (Non-debt Instruments) (Second Amendment) Rules, 2021.

S.O. 3411(E).—In exercise of the powers conferred by clauses (aa) and (ab) of sub-section (2) of section 46 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Central Government hereby makes the following rules further to amend the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, namely:

1. (1) These rules may be called the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2021.
   (2) They shall come into force on the date of their publication in the Official Gazette.
   
2. In the Foreign Exchange Management (Non-debt Instruments) Rules 2019, in Schedule 1, in the Table,-
   
   (i) against Sl. No. F. 2.1, for entry (c), the flowing entry shall be substituted, namely:-
   “(c) Applications for foreign direct investment in private banks having joint venture or subsidiary in insurance sector may be addressed to the Reserve Bank for consideration in consultation with the Insurance Regulatory and Development Authority of India, in order to ensure that the limit of foreign investment applicable for the insurance sector as specified in serial number F. 8.1 and F. 8.2 is not breached.”;
   
   (ii) against Sl. No. F. 8.1, in column (3), under the heading “Sectoral Cap,” for the entry, the following entry shall be substituted, namely:-
   “74%”
   
   (iii) against Sl. No. F. 8.3, in column (2), under the sub-heading “Other conditions,”-
   
   (A) in clause (a), for the words “forty nine,” the word “seventy-four” shall be substituted;
   
   (B) in clause (b), for the words “forty nine,” the word “seventy-four” shall be substituted;
   
   (C) for clause (d), the following clause shall be substituted namely :-
   
   “(d) (I) In an Indian Insurance Company having foreign investment,-
   (i) a majority of its directors;
   (ii) a majority of its Key Management Persons; and
   (iii) at least one among the Chairperson of its Board, its Managing Director and its Chief Executive Officer, shall be Resident Indian Citizens.
   
   Explanation: For the above purposes, the expression- “Key Management Person” shall have the same meaning as assigned to it in guidelines made by the Insurance Regulatory and Development Authority of India on corporate governance for insurers in India.
   
   (II) An Indian Insurance company having foreign investment shall comply with the provisions under the Indian Insurance Companies (Foreign Investment) Rules, 2015, as amended from time to time and applicable rules and regulations notified by the Department of Financial Services or the Insurance Regulatory and Development Authority of India from time to time.”;
   
   (D) in clause (e), for the figures “2014,” the figures “2019” shall be substituted;
   
   (E) in clause (g), for the portion beginning with the words “the condition of India owned and controlled,” and ending with the words “key management persons,” the following shall be substituted namely :-
   “the composition of the Board of Directors and key management persons of Intermediaries or Insurance Intermediaries”;
   
   (F) for clause (k), the following clause shall be substituted, namely :-
   
   “(k) Terms „Equity Share Capital,‟ „Foreign Direct Investment‟ (FDI), „Foreign Investors,‟ „Foreign Portfolio Investment,‟ „Indian Insurance Company,‟ „Indian Company,‟ „Non-resident Entity,‟ „Public Financial Institution,‟ „Resident Indian Citizen,‟ „Total Foreign Investment‟ shall have the same meaning as provided in Notification No. G.S.R 115 (E), dated the 19th February, 2015 issued by Department of Financial Services and regulations issued by Insurance Regulatory
   and Development Authority of India from time to time.”.

Note : The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide number S.O. 3732(E), dated the 17th October, 2019 and subsequently amended vide notification numbers:-
(i) S.O. 4355(E), dated the 5th December 2019,
(ii) S.O. 1278(E), dated the 22nd April, 2020,
(iii) S.O. 1374(E), dated the 27th April, 2020,
(iv) S.O. 2442(E), dated the 27th July, 2020,
(v) S.O. 4441(E), dated the 8th December, 2020,
(vi) S.O. 3206(E), dated the 9th August, 2021.

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