FEMA RULES, 2024 (Syllabus: GS Paper 3 – Economy)
Context: The Department of Economic Affairs, Ministry of Finance, has amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, to streamline regulations concerning Foreign Direct Investment (FDI) and Overseas Investment.
Foreign Exchange Management (Non-debt Instruments) Rules, 2024
- Cross-border Share Swaps: Simplifies the process for cross-border share swaps, allowing for the issue or transfer of Indian company equity instruments in exchange for foreign company equity instruments.
o Facilitates global expansion of Indian companies through mergers, acquisitions, and strategic initiatives, helping them enter new markets and grow internationally.
- FDI in White Label ATMs: Permits 100% Foreign Direct Investment (FDI) under the Automatic Route in White Label ATMs.
o Aims to enhance financial inclusion across the country by allowing non-banks to set up, own, and operate ATMs.
- Definition of 'Startup Company': Aligns the definition of 'Startup Company' with the 2019 notification by the Department of Industry and Internal Trade.
- An entity qualifies as a startup if it is:
o Incorporated as a private limited company or registered as a partnership firm or a limited liability partnership.
o Within 10 years from its incorporation or registration.
o Has a turnover not exceeding ₹100 crore in any of the financial years since incorporation or registration.
Foreign Exchange Management Act (FEMA), 1999
- About: FEMA primarily addresses provisions related to cross-border trade and payments, defining procedures for foreign exchange transactions in India.
- Introduced: In 1999.
- Replacement of FERA: FEMA replaced the earlier Foreign Exchange Regulation Act (FERA) and has since governed foreign exchange transactions in the country.
- Headquarter: Delhi.
