MUMBAI: RBI has proposed sweeping changes to foreign investment rules through a draft framework that raises the ceiling for repatriable gifts to the Liberalised Remittance Scheme limit of $2,50,000 from $50,000 and restricts such transfers to near relatives, while broadening equity classifications, easing capital structuring options, and tightening definitions of control under Fema.
In a move to overhaul the regulatory architecture, RBI released the draft Foreign Exchange Management (Foreign Investment) Rules, 2026, which will replace the existing Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. The proposed framework seeks to streamline inward investments by adopting accounting-based standards for equity instruments, expanding avenues for capital consideration through mechanisms such as SPV equity swaps and direct international listings, redefining regulatory control through a 10% voting rights threshold, formalising the tracking of foreign controlled entities, liberalising sectoral limits in insurance and space, and setting out reclassification rules when foreign portfolio investment thresholds are breached.
Foreign investment into India is currently governed by the NDI Rules, 2019. The Union Budget 2026-27 had announced a comprehensive review of these rules to create a more contemporary and user-friendly framework aligned with evolving economic priorities. According to RBI, a committee constituted by govt undertook a detailed review of the existing regulatory framework, following which the draft rules were prepared in consultation with govt and other stakeholders.
According to RBI, the amendment aims to make rules simpler and principle-based and align them with the FDI policy while improving ease of doing business and making regulations future-ready. The draft establishes a clearer division of responsibilities between RBI and the Department for Promotion of Industry and Internal Trade, with RBI retaining operational oversight, reporting and payment mechanisms, while policy interpretation is vested with DPIIT.
To tighten oversight, the draft expands the definition of control by introducing a 10% voting rights threshold, stating that any investor holding such rights, individually or in concert, or having policy or management control, will be deemed to control the entity. It also formally defines foreign controlled entities to enable better tracking of downstream foreign investment.
