RBI Relaxed Norms for Overseas Investment Ties for Offshore Funds

Current Context: The Reserve Bank of India (RBI) has indeed relaxed the norms for overseas investment on 9th June 2024.

• Here are the key points:
• The RBI has allowed listed Indian companies and resident individuals to invest in offshore funds that are regulated through their fund managers.
• These investments can be in any instrument, regardless of its form, and in funds set up as limited partnerships, LLCs, VCCs, companies, or trusts.
• Until now, overseas portfolio investment (OPI) was permitted only if the ‘funds’ were regulated in their home jurisdiction and the investments were in ‘units’ of the funds.
• The RBI issued a circular on Friday amending the Foreign Exchange Management (Overseas Investment) Directions, 2022, lifting several restrictions.
• This will re-open the doors for LP investment into Singapore’s Variable Capital Company (VCC) funds as well as funds set up in Delaware, and allow Indian employees of Indian advisory entities to participate in overseas funds.
• This move is expected to provide more flexibility and opportunities for Indian investors and companies in the global market.

Question:

1 What types of offshore funds can listed Indian companies and resident individuals invest in after the RBI’s new norms?

• A) Only in funds set up as limited partnerships
• B) Only in funds set up as LLCs
• C) In any instrument, regardless of its form, and in funds set up as limited partnerships, LLCs, VCCs, companies, or trusts
• D) Only in funds set up as trusts 

Answer: C) These investments can be in any instrument, regardless of its form, and in funds set up as limited partnerships, LLCs, VCCs, companies, or trusts.