The Reserve Bank of India (RBI) has unveiled a draft overhaul of foreign investment regulations, aiming to make the regime easier to understand and less burdensome for overseas investors.
On 21 July, the apex bank placed the draft Foreign Exchange Management (Foreign Investment) Rules, 2026, in the public domain for consultation.
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The proposed rules are intended to replace the current Foreign Exchange Management (Non-Debt Instruments) Rules, 2019.
Stakeholders can submit comments until 31 August.
According to the central bank, the new framework follows a principle-based approach.
It seeks to streamline provisions, align definitions and simplify the overall regulatory structure.
The stated objective is to improve clarity and lower compliance costs for foreign investors.
One of the main changes is a sharper separation between procedural provisions under FEMA and policy as well as sector-specific conditions laid down in the government’s FDI policy.
The RBI said this distinction would strengthen regulatory coherence and support quicker policy updates.
The draft also proposes “investee-neutral and investor-neutral” provisions.
In place of highly prescriptive rules, the RBI has suggested a framework that can adjust to changing business practices while preserving essential regulatory safeguards.
The review of the NDI Rules had been announced in the Union Budget for 2026-27.
It was part of the government’s broader effort to build a more “contemporary” and “user-friendly” foreign investment regime, the RBI added.
After that announcement, the centre set up a committee to assess the existing regulations.
The central bank said the draft rules were prepared on the basis of that committee’s recommendations and after consultations with the government and other stakeholders.
The move comes amid a wider regulatory push by the central bank.
Separately, in June, the RBI issued draft rules calling for banks and other regulated entities to strengthen monitoring of risks arising from AI and machine-learning models.
Its draft Guidance on Regulatory Principles for Model Risk Management said regulated entities should implement a board-approved model risk management framework covering all models in operation, including AI and ML systems.
Earlier, in May, the central bank formed an eight-member committee to study issues related to quantum technology and prepare a roadmap and framework to make India’s financial system quantum-secure.
