Quick Summary
In the 2024 Union Budget, the Indian government introduced a significant amendment to the Foreign Exchange Management Act (FEMA) (Non-debt Instruments) Rules, 2019, facilitating Foreign Direct Investment (FDI) and Overseas Direct Investment (ODI) swaps. This provision allows investors to exchange their FDI in Indian entities for ODI in foreign entities, streamlining cross-border investment processes. Key changes include the exclusion of investments by Overseas Citizens of India (OCIs) on a non-repatriation basis from indirect foreign investment calculations, removal of the 49% aggregate cap on Foreign Portfolio Investors (FPIs), and the recognition of ‘White Label ATM Operations’ as a new sector with 100% FDI permitted. These reforms aim to enhance investment flexibility and attract more global investors to India’s evolving financial landscape.
Blog Content Overview
Following the recent budget announcement, which aimed to simplify regulations for Foreign Direct Investment (FDI) and Overseas Investment (ODI), the Department of Economic Affairs has amended the FEMA (Non-debt Instruments) Rules 2019. A significant aspect of this amendment is the introduction of a new provision that enables FDI-ODI swaps. We have curated a slide below to help you understand this better.
Broad Mechanics
- Foreign Company A holding shares in Foreign Company B.
- Foreign Company A transferring shares of Foreign Company B to Indian Company.
- Indian Company issuing its shares to Foreign Company A as consideration for acquiring shares of Foreign Company B.
- Indian Company is the new holding company of Foreign Company B.
Indian Company now permitted to acquire shares of a Foreign Company under ODI Rules via the swap route.
i.e., Consideration for purchase of shares of Foreign Company B from Foreign Company A can be discharged by way of issuing its own equity shares to Foreign Company A.


๐๐ต๐ฉ๐ฆ๐ณ ๐ข๐ฎ๐ฆ๐ฏ๐ฅ๐ฎ๐ฆ๐ฏ๐ต๐ด:
1. Investment by OCIs on non-repat basis ๐๐ฑ๐๐ฅ๐ฎ๐๐๐ from calculation of indirect foreign investment. Earlier only NRI investment was excluded.
2. Aggregate FPI cap of 49% of paid-up capital on a fully diluted basis has now been removed. FPIs now required to ๐จ๐ง๐ฅ๐ฒ ๐๐จ๐ฆ๐ฉ๐ฅ๐ฒ ๐ฐ๐ข๐ญ๐ก ๐ฌ๐๐๐ญ๐จ๐ซ๐๐ฅ ๐จ๐ซ ๐ฌ๐ญ๐๐ญ๐ฎ๐ญ๐จ๐ซ๐ฒ ๐๐๐ฉ.
3. ‘White Label ATM Operations’ has been recognized as a new sector, with 100% ๐ ๐๐ ๐ง๐จ๐ฐ ๐๐ฅ๐ฅ๐จ๐ฐ๐๐ ๐ฎ๐ง๐๐๐ซ ๐ญ๐ก๐ ๐๐ฎ๐ญ๐จ๐ฆ๐๐ญ๐ข๐ ๐ซ๐จ๐ฎ๐ญ๐.
Key Indian players in this sector: India1 Payments, Indicash ATM (Tata Communications), Vakrangee, and Hitachi Payments.
4. NR to NR transfer will require prior Govt approval ๐ฐ๐ก๐๐ซ๐๐ฏ๐๐ซ ๐๐ฉ๐ฉ๐ฅ๐ข๐๐๐๐ฅ๐. In the erstwhile provisions, it was required only if investment in the specific sector required prior Govt approval.
5. Definitions – Control now defined in Rule 2, and definition of “startup company” has been aligned with “startups” recognised by DPIIT vide notification dated February 19, 2019. Definitions of “control” and “startup company” elsewhere have been deleted.
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