Key takeaways
- In India, the definition of “Overseas Portfolio Investment” has been expanded to include any instrument issued by an overseas investment fund that is managed by a fund manager regulated in the host jurisdiction
- Listed Indian companies and individuals resident in India can now invest in Overseas Portfolio Investments
- Regulated fund managers looking to attract Indian investors may now consider using structures such as the Singapore limited partnership or the Singapore variable capital company
Introduction
On 7 June 2024, the Reserve Bank of India (RBI) issued a circular that amends the Foreign Exchange Management (Overseas Investment) Directions, 2022 with respect to investments in overseas funds (Circular).
Key changes
The Circular expands the definition of Overseas Portfolio Investment (OPI) by:
- Including investments in any instrument issued by an overseas investment fund regulated by the host jurisdiction financial sector regulator (Regulated Fund). Previously, this was limited to “units” issued by such a Regulated Fund.
- Specifying that a Regulated Fund includes an investment fund whose activities are regulated by the host jurisdiction financial sector regulator through its fund manager. Previously, the investment fund itself had to be regulated by such a regulator.
With the latest changes, OPI includes an investment into an investment fund structured as a Singapore limited partnership or a Singapore variable capital company (in each case managed by a Singapore-regulated fund manager). Listed Indian companies and individuals resident in India (Qualifying Investors) can thus invest in such investment funds as OPIs.
To attract Qualifying Investors, regulated fund managers can now utilise Singapore structures such as limited partnerships and variable capital companies.
Conclusion
The Circular is a welcome step by the RBI to facilitate and simplify the overseas investment regime for Qualifying Investors.
Client Alert 2024-145