MoF Notifies Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2026

Ministry of Finance (“MoF”) through notification no. S.O. 3030(E) dated 12.06.2026, notified the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2026 (“NDI Amendment Rules”) to amend the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (“NDI Rules”).

The salient features of the NDI Amendment Rules are as follows:

1. Expansion of Chapter V to all individual non-residents: The heading of Chapter V has been substituted from “Investment by non-resident Indian or an overseas citizen of India” to “Investment by an individual person resident outside India including a non-resident Indian or an overseas citizen of India”, expanding the chapter from being applicable only to Non-Resident Indian (“NRIs”)/ Overseas Citizen of India (“OCIs”) to covering all individual non-resident investors.

2. Rule 12 - Investment on repatriation basis by individual non-residents: The amended Rule 12(1) now confers on “an individual person resident outside India” (including NRIs/OCIs) the ability, on a repatriation basis, to purchase or sell equity instruments of a listed Indian company and other securities. A new proviso to rule 12(1) has also been introduced, where prior government approval is mandatory for an investment by an individual person resident outside India resulting in transfer of ownership or control of a listed Indian company to (i) entities or citizens of a country sharing land border with India, or (ii) where the beneficial owner of such investment is a citizen of any such country.

3. Rule 13 - Transfer by individual non-residents: Under the amended Rule 13, any individual person resident outside India holding equity instruments of an Indian company or units, can transfer such holdings, in line with conditions in the relevant Schedules and the terms set out in rule 13. Sub-rule (1) of Rule 13 has also amended so that an individual person resident outside India holding equity instruments or units on a repatriation basis may transfer them by way of sale or gift to any person resident outside India. However, prior Government approval is required, where the transfer to another individual person resident outside India results in transfer of ownership or control of a listed Indian company to (i) entities or citizens of a country sharing land border with India, or (ii) where the beneficial owner of such investment is a citizen of any such country

4. Schedule II - Aggregation of FPI holdings across routes: In Schedule II, paragraph (1)(a)(i) is amended to substitute the proviso to clarify that the total holding of a foreign portfolio investor in a listed Indian company across all routes, i.e., under Schedules II, III or any other schedule, including through an “investor group”, must remain below the prescribed individual limit, and in case of investments of ten per cent or more, the divestment clause in Schedule II will apply.

5. Schedule III - New individual portfolio regime and FDI reclassification:

(a) Under the pre-amendment position, the total holding by any individual NRI or OCI could not exceed 5% (five percent) of the total paid-up equity capital on a fully diluted basis (or 5% of the paid-up value of each series of debentures, preference shares or share warrants), and the aggregate holding of all NRIs and OCIs together was capped at 10% (ten percent) of such capital or value, with the aggregate ceiling of 10% capable of being raised to 24% (twenty four percent) by a special resolution of the Indian company. Post the NDI Amendment Rules, the total holding by any individual person resident outside India must be less than 10% (ten percent) of the total paid-up equity capital on a fully diluted basis or less than 10% of the paid-up value of each relevant series, and that the total holdings of all such individual persons under this Schedule in the Indian company shall not exceed 24% (twenty four percent) of the corresponding paid-up equity capital or paid-up value.

(b) A new paragraph (1)(c) has been inserted, requiring that any investment by an individual person resident outside India made in breach of the prescribed “less than ten per cent” limit be divested within five trading days from the date of settlement of the trades causing the breach, failing which the entire investment in the concerned company by such person is to be treated as foreign direct investment and no further portfolio investment in that company may be made by that person. It also mandates intimation of the breach to depositories and the company within seven trading days and clarifies that, where divestment or conversion to FDI occurs within the prescribed time, the interim breach of aggregate or sectoral limits will not be reckoned as a contravention under the NDI Rules.

NDI Amendment Rules came into force on the day they were notified in the Official Gazette, i.e., 12.06.2026.

* Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2026.

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