RBI Introduces FEMA Regulations for Direct Listing on International Exchanges
The Reserve Bank of India (RBI) has unveiled regulations under the Foreign Exchange Management Act (FEMA) to facilitate the direct listing of Indian companies on international stock exchanges. These regulations aim to streamline foreign exchange transactions and reporting procedures, offering companies greater flexibility in utilizing funds raised through overseas listings.
The regulations stipulate that proceeds from the purchase or subscription of equity shares of Indian companies listed on international exchanges must either be remitted to an Indian bank account or deposited in a foreign currency account of the Indian company. Sale proceeds, net of taxes, can be remitted abroad or credited to the bank account of the permissible holder. Reporting of foreign exchange transactions will be conducted by the investee Indian company through an authorized dealer. If an Foreign Portfolio Investor (FPI) invests through a stock exchange, the authorized dealer will report to the RBI.
For residents in India raising funds through External Commercial Borrowings (ECB), American Depository Receipts (ADRs), Global Depository Receipts (GDRs), or direct listing of equity shares on international exchanges, unutilized or repatriated funds will be held in foreign currency accounts with a bank outside India.
These regulations, building upon the Finance Ministry’s scheme for direct listing of equity shares on international exchanges, signify India’s commitment to fostering a conducive environment for global competitiveness and attracting foreign investments. Aligning corporate strategies with these regulations will enable companies to leverage international finance opportunities effectively and contribute to India’s economic growth on a global scale.
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