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FEMA & RBI

RBI’s Draft Foreign Investment Rules, 2026: NDI Rules Set for Ground-Up Rewrite

Published 6 Aug 2026· Updated 6 Aug 2026· 2 min read

On 21 July 2026 (Press Release No. 2026-2027/726), the Reserve Bank of India released the draft Foreign Exchange Management (Foreign Investment) Rules, 2026, proposing to replace the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (NDI Rules) in their entirety. The stated aim is a simpler, more transparent, investee-centric regulatory framework, following a commitment made in the Union Budget 2026-27. Public comments are open until 31 August 2026 via the RBI’s “Connect 2 Regulate” portal or by email.

What Triggered the Draft

The current NDI Rules, 2019 have been in force for close to seven years and organise compliance obligations primarily by category of investor. The Union Budget 2026-27 speech flagged a review of the foreign investment framework to reduce compliance friction for Indian investee companies, and this draft is RBI’s response.

What Changes

The headline shift is structural: from investor-centric to investee-centric regulation. The existing rules organise obligations by category of investor — a person resident outside India, an NRI, an OCI. The draft reorganises the framework around the investee entity instead — the Indian company receiving the investment.

  • Land-border restrictions linked to the Press Note 3 (2020) regime are proposed to be eased, subject to final confirmation of scope
  • Definitions are proposed to be rationalised and harmonised to reduce the interpretive overlaps that have historically caused compliance disputes under the NDI Rules
  • A clearer separation is proposed between core FEMA procedural requirements and policy/sector-specific conditions, so that sector policy can change without a FEMA rules amendment each time

Practical Implication

If finalised in a form close to the draft, this is a significant compliance-architecture change for any practice advising on inbound FDI. Client-facing checklists organised around “is my client a resident/NRI/OCI investor” would need to be rebuilt around the investee entity’s classification instead. Firms with clients currently navigating land-border-linked investment restrictions should track this closely, since that provision is among the most consequential and most likely to be refined before finalisation.

Action Checklist

  • Review ongoing and upcoming FDI engagements for exposure to the land-border restriction provisions
  • Diarise the 31 August 2026 comment deadline and evaluate whether client-specific representations are warranted
  • Begin mapping existing investor-centric compliance checklists to an investee-centric structure in anticipation of the final rules
  • Monitor the RBI’s “Connect 2 Regulate” portal for the final notified rules

Relevant References

  • Foreign Exchange Management Act, 1999
  • Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 — proposed to be replaced
  • Draft Foreign Exchange Management (Foreign Investment) Rules, 2026 — RBI Press Release No. 2026-2027/726, dated 21 July 2026
  • Comment deadline: 31 August 2026, via “Connect 2 Regulate” portal or email
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