RBI releases draft foreign investment rules to simplify FDI framework

The Reserve Bank of India (RBI) on Tuesday released the draft Foreign Exchange Management (Foreign Investment) Rules, 2026. It has proposed a comprehensive overhaul of the regulatory framework governing foreign investment into India.

The central bank has invited comments from stakeholders until August 31, 2026 before finalising the rules.

The Union Budget 2026-27 had announced a comprehensive review of the existing Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (NDI Rules) to create a more contemporary and user-friendly framework for foreign investments.

"Foreign investment into India is presently governed by the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 ('NDI Rules'). The Union Budget 2026-27 announced a comprehensive review of the NDI Rules to create a more contemporary, user-friendly framework for foreign investments, consistent with India's evolving economic priorities," the bank regulator said in a statement.

Committee Reviewed Existing Framework

The RBI said the Central Government had constituted a committee to undertake a comprehensive review of the current regulatory framework.

"Pursuant thereto, a committee was constituted by the Central Government to undertake a comprehensive review of the extant regulatory framework. Based on the recommendations of the Committee, and in consultation with the Central Government and other stakeholders, the Reserve Bank of India has prepared a draft of the rationalized Rules," it said.

Key Features Of The Proposed Rules

According to the RBI, the proposed framework seeks to simplify regulations while making them more transparent and aligned with evolving business practices.

Among the key changes proposed are:

Simplified, principle-based framework: Rationalisation of provisions, harmonisation of definitions and a simplified regulatory architecture to improve clarity and reduce regulatory complexity.

Alignment with the FDI Policy: A clearer separation between procedural FEMA provisions and policy or sector-specific requirements to improve regulatory coherence and enable quicker policy changes.

Greater ease of doing business: Streamlined procedures, lower compliance burden and greater operational flexibility through a transparent and investor-friendly framework.

Future-ready regulations: Adoption of principle-based, investee-neutral and investor-neutral provisions aligned with evolving business practices while retaining necessary regulatory safeguards.

Public consultation open till August 31

The RBI said the draft rules have been placed on its website for wider public consultation and will be finalised after considering stakeholder feedback.

"The Rules will be finalized after wider public consultations. Accordingly, the Reserve Bank of India has today placed on its website draft Foreign Exchange Management (Foreign Investment) Rules, 2026 for comments / feedback from all stakeholders," it said.

Stakeholders can submit their comments through the 'Connect 2 Regulate' section on the RBI's website or via email by August 31, 2026, with the subject line "Feedback on Draft Foreign Investment Rules."