FinMin relaxes rules for overseas investment in strategic sectors

New Delhi, August 23

The government on Tuesday said that an Indian corporate entity can make overseas investments beyond the prescribed limit in strategic sectors, like energy and natural resources, after obtaining necessary permissions.

Releasing an explanatory note on Overseas Direct Investment Rules and Regulations 2022, the finance ministry said a non-financial sector entity can make a direct investment under an automatic route into a foreign entity engaged in financial services activity (except banking and insurance).

The earlier regime did not permit Overseas Direct Investment by a non-financial sector Indian entity into a foreign firm engaged in financial services activity. “An Indian entity not engaged in the insurance sector may make Overseas Direct Investment in general and health insurance where such insurance business is supporting the core activity undertaken overseas by such an Indian entity,” it said.

The government on Monday issued two gazette notifications in which Overseas Direct Investment and Overseas Portfolio Investment have been demarcated.

In the earlier regulations, Overseas Portfolio Investment was not clearly defined. The other terms such as control, disinvestment, step down subsidiary and financial services activity, among others, have also been defined.

The note further said a new concept of the strategic sector has been introduced under the new regime where the government would have powers to permit overseas investment in excess of the limits provided in the Overseas Investment Rules.

“The strategic sector shall include energy, natural resources and such other sectors as may be decided by the government from time to time in view of the evolving business requirements,” it added. — PTI

Explanatory note released

• Under Overseas Direct Investment Rules and Regulations, a non-financial sector entity can make a direct investment into a foreign entity engaged in financial services (except banking and insurance).
• The same was not permitted by the earlier regime.