RBI eases investment and trade rules for NRIs
What's the story
The Reserve Bank of India (RBI) has announced a series of reforms aimed at easing regulations for Non-Resident Indians (NRIs). The measures are designed to simplify foreign exchange management, trade-linked transactions, remittance flows, and investment opportunities. The changes are part of RBI's broader strategy to enhance the global standing of the Indian rupee (INR).
Regulatory changes
Simplifying regulations for non-residents
The RBI has proposed simplifying regulations under the Foreign Exchange Management Act (FEMA) for non-residents. This includes rationalizing the External Commercial Borrowing (ECB) framework, which covers eligible borrowers, recognized lenders, borrowing limits, and reporting requirements. The central bank also plans to ease regulatory hurdles for non-residents looking to establish a business presence in India. These changes are aimed at making India more attractive and accessible for NRI entrepreneurs and investors.
Currency expansion
Expanding rupee's reach
In a major move, the RBI has decided to expand the use of the rupee in cross-border transactions. Authorized dealer banks will be allowed to lend in INR to non-residents in Bhutan, Nepal, and Sri Lanka for trade activities. The central bank will also establish transparent reference rates for currencies of India's major trading partners, making rupee-based trade more reliable.
Investment opportunities
New investment avenues for NRIs
The RBI has also allowed balances in Special Rupee Vostro Accounts (SRVAs) to be used for investments in corporate bonds and commercial papers. This move opens up new investment opportunities for NRIs and overseas institutions looking to transact and invest in India using the Rupee. To support exporters, the central bank has extended the repatriation period for funds in International Financial Services Centre (IFSC) accounts from one month to three months.
Investment cap review
Raising foreign investment limits in Indian companies
The RBI is also mulling a proposal to raise the investment cap for individual foreign investors, including NRIs, in listed Indian companies. The individual cap, currently at 5%, could be doubled to 10%. The overall ceiling for overseas individuals is also likely to increase from 10% to 24%. If implemented, these changes would give NRIs greater access and a larger stake in India's equity markets and corporate sector.
Remittance review
Revamping the Liberalized Remittance Scheme (LRS)
The RBI is also reviewing the Liberalized Remittance Scheme (LRS) framework, which saw outward remittances touch $30 billion in FY25. The review will focus on rationalizing rules and encouraging greater use of the Rupee in international transfers. For NRIs, this could bring clarity on remittance limits, eligible investments, and currency options, potentially changing how money is sent abroad.