RBI Decides to Regularise Prior Issuance of Partly Paid Units by AIFs to Non-Residents via Compounding Under FEMA

Circular No. RBI/2024-25/36 A.P. (DIR Series) Circular No. 7, Dated: 21.05.2024

Earlier in March, 2024, the Reserve Bank of India (RBI) notified the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2024[ Notified vide vide S.O. 1361(E), dated March 14, 2024]. The amended norms enabled the issuance of partly paid units to persons resident outside India by investment vehicles.

Now, the RBI has notified RBI’s A.P. (DIR Series) Circular No. 7. The RBI has decided to regularise the issuance of partly paid units by Alternative Investment Funds to persons resident outside India prior to the said amendment through compounding under the Foreign Exchange Management Act, 1999.

However, before approaching the Reserve Bank for compounding, AD Category-I banks may ensure that the necessary administrative action, including reporting such issuances by Alternative Investment Funds to the Reserve Bank through the Foreign Investment Reporting and Management System (FIRMS) Portal and issuing conditional acknowledgements for such reporting are completed.

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