Context:
Department of Economic Affairs has amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.
Recent Amendments:
- Simplifies cross-border share swaps and provide for issue or transfer of Indian company equity instruments in exchange for foreign company equity instruments.
- Allows 100% FDI under Automatic Route in White Label ATMs to boost financial inclusion nationwide.
- White Label ATMs – ATMs set up, owned, and operated by non-banks.
- Harmonizes definition of ‘Startup Company’ with 2019 notification issued by Department of Industry and Internal Trade.
- According to 2019 notification, an entity will be considered a Startup for upto a period of 10 years from the date of incorporation/ registration and if the turnover of the entity has not exceeded ₹ 100 crore.
Foreign Exchange Management (Non debt Instruments) Rules, 2019:
- Issued under – Foreign Exchange Management Act, 1999.
- Aim – To regulate the investment by foreign entities in non-debt instruments of Indian entities.
- Non-debt instruments include –
- Equity investment instruments in incorporated entities (public, private, listed, and unlisted)
- Capital participation in Limited Liability Partnerships.
- Instruments of investment recognized in the FDI policy.
- Investment in Alternative Investment Funds (AIFs), Real Estate Investment Trusts (REITs), and Infrastructure Investment Trusts (InvIts).
- Investment in units of mutual funds or Exchange-Traded Fund (ETFs).
- Acquisition, sale or dealing directly in immovable property.
- Contribution to trusts
- Depository receipts issued against equity instruments
Source: PIB
Previous Year Question
Consider the following statements with reference to India:
1. According to the ‘Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, the ‘medium enterprises’ are those with investments in plant and machinery between Rs. 15 crores and Rs. 25 crores.
2. All bank loans to the Micro, Small and Medium Enterprises qualify under the priority sector.
Which of the statements given above is/are correct?
[UPSC Civil Services Exam – 2023 Prelims]
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (b)
Explanation:
Medium Enterprise: An enterprise where the investment in plant and machinery or equipment does not exceed Rs. 50 crores, and turnover does not exceed Rs. 250 crores. Hence, Statement 1 is not correct.
The areas identified under Priority Sector Lending (PSL) in India by the Reserve Bank of India include agriculture, micro, small and medium enterprises (MSMEs), export credit, education, housing, social infrastructure, renewable energy, and weaker sections of society. Hence, Statement 2 is correct.
