On June 13, 2026, the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 (“Principal Regulations”) were amended by the Reserve Bank of India (“RBI”) vide the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) (Amendment) Regulations, 2026 (“Amendment Regulations”).

The Principal Regulations provide for the mode of payment and reporting requirements for investment in India by a person resident outside India, and prescribe the procedural framework for receipt of consideration, remittance of sale proceeds, and filing of applicable returns and reports in respect of transactions involving non-debt instruments, pursuant to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (“NDI Rules”).

RBI, on June 12, 2026, amended the NDI Rules vide the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2026 (“Amendment Rules”). The Amendment Rules inter alia expanded the route for investments by individuals resident outside India. The erstwhile NDI Rules only provided for investments by non- resident Indians (“NRIs”) / overseas citizens (“OCIs”), and vide the Amendment Rules, RBI has allowed investments by a broader category, i.e. by any individual person resident outside India including NRIs/ OCIs. This has allowed all foreign individual investors to invest in and transfer equity instruments and other securities on a repatriation basis under Schedule III of the NDI Rules subject to conditions stipulated therein.

In furtherance to amendments brought about by the Amendment Rules, RBI issued the Amendment Regulations to align the mode of payment and reporting requirements for investments in India pursuant to the amended NDI Rules.

Key provisions of the Amendment Regulations

I. Investments by individual persons resident outside India including NRIs and OCIs (Schedule III of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019)

1. Mode of Payment:

(i) Mode of payment for investments other than in NPS: As per the Principal Regulations, NRIs and OCIs proposing to make an investment on a repatriable basis could use funds lying only in a Non-Resident External (“NRE”) account. The Amendment Regulations allow for such investments to be made by any individual person resident outside India via any repatriable deposit account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016 (“Deposit Regulations”).

(ii) Mode of payment for subscription to NPS: Further, specifically in respect of subscription to national pension scheme (“NPS”) by NRIs/ OCIs, payments can be made out of funds held in any repatriable foreign currency or rupee account or Non-Resident Ordinary (“NRO”) account instead of only NRE/ Foreign Currency Non-Resident (Bank) (“FCNR (B)”)/ NRO account.

2. Remittance of Sale Proceeds:

(i) Remittance of sale proceeds of equity instruments: The Amendment Regulations have expanded the scope to allow for deposit of sale proceeds into any designated rupee account instead of restricting such right of credit to only the NRE Portfolio Investment Scheme (“PIS”) account of the person concerned.

(ii) Remittance of sale proceeds of units of mutual funds and subscription to NPS: The Amendment Regulations have expanded the scope to allow for deposit of sale proceeds into any account maintained in accordance with the Deposit Regulations at the option of the investor, instead of restricting it to NRE(PIS)/FCNR(B)/NRO account.

II. Remittance of consideration amounts for purchase or subscription of equity shares of Indian companies listed on an international exchange (Schedule XI)

Previously, as per the Principal Regulations, where a foreign investor was desirous of purchasing or subscribing to equity shares of an Indian company listed on an international exchange, remittance of consideration for such investment was permitted through: (a) banking channels to foreign currency account(s) of the Indian company; or (b) as an inward remittance from abroad through banking channels. The Amendment Regulations now also permit remittance of proceeds for purchase consideration by the investors out of funds held in any repatriable foreign currency or rupee account maintained in accordance with the Deposit Regulations.

III. Reporting Requirements: Replacement of LEC (NRI) by LEC (IFI) (Regulation 4(9))

Pursuant to the Amendment Regulations, the Authorized Dealer (“AD”) Category-I banks are now required to report the purchase / transfer of equity instruments by an individual person resident outside India on an Indian stock exchange, to the RBI, by filing Form LEC Individual Foreign Investor (“IFI”) in place of Form LEC (NRI).

The Amendment Regulations seek to align the payment, remittance and reporting framework under the Principal Regulations with the relaxations introduced under the Amendment Rules. By permitting specified investments to be routed through repatriable deposit accounts and designated repatriable rupee accounts maintained in accordance with the Deposit Regulations, the amendments are aimed at reducing operational friction for non-resident investors while preserving the requirement that investment flows be channelled through regulated banking systems.

The full text of the Amendment Regulations can be accessed here.

The full text of the Amendment Rules can be accessed here.

This update has been contributed by Aastha (Partner), Astha Singhania (Senior Associate) and Ekta Gupta (Associate).

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