Notification No.
FEMA. 395(4)/2026-RB
4th Amendment
Date
June 13, 2026
Signatory
Rohit P. Das
Regional Director, RBI
Statutory Authority
Section 47, FEMA 1999
Schedules Amended
Schedule III & Schedule XI
Effective
From Official Gazette Publication
📌 REGULATORY UPDATE — FEMA MODE OF PAYMENT RULES AMENDED FOR NRI/OCI AND INTERNATIONAL EXCHANGE INVESTORS
RBI has issued Notification No. FEMA. 395(4)/2026-RB dated June 13, 2026 — the Fourth Amendment to the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019. Three sets of changes are made: (1) revised payment and remittance rules for NRI/OCI investments on repatriation basis under Schedule III; (2) revised payment and remittance rules for International Exchange investments under Schedule XI; and (3) updated LEC (IFI) reporting obligation for AD Category I banks. All provisions are effective from the date of publication in the Official Gazette.
The Reserve Bank of India, Foreign Exchange Department, Central Office, Mumbai, has issued Notification No. FEMA. 395(4)/2026-RB dated June 13, 2026, signed by Rohit P. Das, Regional Director. The notification amends the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 [Principal Regulations: Notification No. FEMA.395/2019-RB dated October 17, 2019] in exercise of powers conferred by Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999). This is the fourth amendment to the principal regulations, which have previously been amended in 2020, 2024, and January 2025.
The amendment makes targeted substitutions to Regulation 3.1 (Schedule III for NRI/OCI investments on repatriation basis, and Schedule XI for International Exchanges Scheme) and Regulation 4(9) (LEC reporting by Authorised Dealer Category I banks). The provisions come into force from the date of their publication in the Official Gazette.
📌 Effective Date and Scope
This amendment comes into force from the date of publication in the Official Gazette and amends only Regulation 3.1 and Regulation 4(9) of the Principal Regulations.
📋 REGULATORY FOUNDATION
NOTIFICATION NO.
FEMA. 395(4)/2026-RB dated June 13, 2026
PRINCIPAL REGULATIONS
FEMA.395/2019-RB dated October 17, 2019 [G.S.R. No.795(E)]
STATUTORY AUTHORITY
Section 47, Foreign Exchange Management Act, 1999 (42 of 1999)
PROVISIONS AMENDED
Regulation 3.1 (Sl. No. III — Schedule III; Sl. No. X — Schedule XI); Regulation 4(9)
SIGNATORY
Rohit P. Das, Regional Director, Foreign Exchange Department, RBI, Mumbai
EFFECTIVE DATE
From date of publication in Official Gazette
AMENDMENT HISTORY — FEMA 395 SERIES
Principal Regulations
FEMA.395/2019-RB | Oct 17, 2019
Footnote cites prior amendments dated Jun 15, 2020; Apr 19, 2024; and Jan 15, 2025.
Amendment 1 — Schedule III: NRI/OCI Investments on Repatriation Basis
Regulation 3.1, Sl. No. III of the Principal Regulations governs investments by individual persons resident outside India including Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) on repatriation basis. The existing provision is substituted in its entirety by the following.
A. MODE OF PAYMENT — SCHEDULE III (NRI/OCI, REPATRIATION BASIS)
SUB-PROVISION (1) — General Consideration Payment
The amount of consideration shall be paid as inward remittance from abroad through banking channels OR out of funds held in any repatriable deposit account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.
SUB-PROVISION (2) — Designated Repatriable Rupee Account (NEW)
A repatriable rupee account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016 shall be designated by an individual person resident outside India and the same shall be used exclusively for investments permitted under this Schedule.
SUB-PROVISION (3) — NPS Subscription Payment (Expanded)
Subscription to National Pension System (NPS) by NRIs/OCIs shall be paid as inward remittance from abroad through banking channels OR out of funds held in any repatriable foreign currency or rupee account or NRO account, maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.
📌 Key change: NRO accounts explicitly permitted as source for NPS subscriptions
B. REMITTANCE OF SALE PROCEEDS — SCHEDULE III
SUB-PROVISION (1) — Equity Instruments
The sale proceeds (net of taxes) of equity instruments may be remitted outside India OR may be credited to the designated rupee account of the person concerned.
SUB-PROVISION (2) — Mutual Funds and NPS Units (Expanded Flexibility)
The sale proceeds (net of taxes) of units of mutual funds and subscription to National Pension System by NRIs/OCIs may be remitted outside India OR may be credited to any account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016 — at the option of the NRI/OCI investor.
📌 Key change: "Any account" per FEMA Deposit Regulations gives NRI/OCI greater flexibility in receiving MF and NPS sale proceeds
Amendment 2 — Schedule XI: International Exchanges Scheme (Permissible Holders)
Regulation 3.1, Sl. No. X (Schedule XI) of the Principal Regulations governs the Purchase or Subscription of Equity Shares of Companies Incorporated in India on International Exchanges by Permissible Holders. The existing provision is substituted in its entirety by the following.
A. MODE OF PAYMENT — SCHEDULE XI (INTERNATIONAL EXCHANGES SCHEME)
The amount of consideration for purchase/subscription of equity shares of an Indian company listed on an International Exchange shall be paid through either of the following routes:
ROUTE (i) — Foreign Currency Account of Indian Company
Through banking channels to a foreign currency account of the Indian company held in accordance with the Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015, as amended from time to time.
ROUTE (ii) — Inward Remittance or Repatriable Account
As inward remittance from abroad through banking channels OR out of funds held in any repatriable foreign currency or rupee account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.
📌 EXPLANATION (AS IN NOTIFICATION)
The proceeds of purchase / subscription of equity shares of an Indian company listed on an International Exchange shall either be remitted to a bank account in India or deposited in a foreign currency account of the Indian company held in accordance with the Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015, as amended from time to time.
B. REMITTANCE OF SALE PROCEEDS — SCHEDULE XI
The sale proceeds (net of taxes) of the equity shares may be remitted outside India OR may be credited to the bank account of the permissible holder maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.
Amendment 3 — Regulation 4(9): LEC (IFI) Reporting by AD Category I Banks
Regulation 4(9) of the Principal Regulations governs reporting obligations. The existing provision is substituted by the following:
"LEC (Individual Foreign Investor - IFI): The designated Authorised Dealer Category I banks shall report to the Reserve Bank in Form LEC (IFI) the purchase / transfer of equity instruments by an individual person resident outside India including Non-Resident Indians or Overseas Citizens of India on stock exchanges in India."
WHO MUST REPORT
Designated Authorised Dealer (AD) Category I banks
REPORT TO
Reserve Bank of India
FORM
Form LEC (IFI) — Individual Foreign Investor
WHAT TO REPORT
Purchase/transfer of equity instruments by individual person resident outside India including NRIs/OCIs on stock exchanges in India
Before vs. After: Key Changes at a Glance
Impact Analysis: Who Is Affected and How
Compliance Action Points
📌 FOR NRIs / OCIs INVESTING IN INDIA (REPATRIATION BASIS)
☐ Designate a specific repatriable rupee account (per FEMA Deposit Regulations 2016) for Schedule III investments — this account must be used exclusively for such investments; do not commingle with other funds
☐ NPS subscribers — NRO accounts may now be used directly to pay NPS subscription; update your NPS account funding instructions with your AD bank accordingly
☐ For MF and NPS sale proceeds, exercise the option of receiving in any account per FEMA Deposit Regulations 2016 (NRE, FCNR, or other permitted accounts) — inform your bank/AMC of the preferred account at the time of redemption
📌 FOR AD CATEGORY I BANKS
☐ Update internal systems and SOPs for NRI/OCI account tagging — ensure designated repatriable rupee accounts are marked exclusively for Schedule III investments; prevent commingling
☐ Update NPS subscription payment processing — accept NRO accounts as a valid payment source for NPS subscriptions by NRIs/OCIs
☐ Update LEC (IFI) reporting framework per revised Regulation 4(9) — ensure Form LEC (IFI) covers purchase/transfer of equity instruments by individual persons resident outside India (NRIs/OCIs) on Indian stock exchanges
☐ For International Exchange transactions — implement two-route payment processing for Schedule XI investments; ensure proceeds land in Indian company's bank account in India or its foreign currency account per FEMA (FC Accounts) Regulations 2015
☐ Brief NRI banking relationship managers on the amended Schedule III and Schedule XI provisions — particularly the designated account requirement and expanded NPS payment sources
📌 FOR COMPLIANCE, FEMA ADVISORS & CS/CA PROFESSIONALS
☐ Update FEMA compliance checklists — replace prior Schedule III and Schedule XI provisions with the substituted text from FEMA 395(4)/2026-RB; note the designated account requirement and NRO-to-NPS pathway
☐ Advise NRI/OCI clients investing in equity, mutual funds, and NPS on the new designated account requirements and expanded payment sources — particularly for NPS funding from NRO accounts
☐ For Indian companies listed on international exchanges — ensure foreign currency accounts are maintained per FEMA (Foreign currency accounts by a person resident in India) Regulations, 2015 to receive subscription proceeds from permissible holders
📎 SOURCE & REFERENCES
Primary Source: Notification No. FEMA. 395(4)/2026-RB dated June 13, 2026 — Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) (Amendment) Regulations, 2026
Issued By: Reserve Bank of India, Foreign Exchange Department, Central Office, Mumbai – 400001
Signatory: Rohit P. Das, Regional Director
Statutory Authority: Section 47, Foreign Exchange Management Act, 1999 (42 of 1999)
Principal Regulations: FEMA.395/2019-RB dated October 17, 2019 [G.S.R. No. 795(E), Part II, Section 3, sub-Section (i)]
Related Regulations: Foreign Exchange Management (Deposit) Regulations, 2016; Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015; Foreign Exchange Management (Non-Debt Instruments) Rules, 2019
Prior Amendments: FEMA 395(1)/2020-RB (Jun 15, 2020); FEMA 395(2)/2024-RB (Apr 19, 2024); FEMA 395(3)/2025-RB (Jan 15, 2025)
Issued By: Reserve Bank of India, Foreign Exchange Department, Central Office, Mumbai – 400001
Signatory: Rohit P. Das, Regional Director
Statutory Authority: Section 47, Foreign Exchange Management Act, 1999 (42 of 1999)
Principal Regulations: FEMA.395/2019-RB dated October 17, 2019 [G.S.R. No. 795(E), Part II, Section 3, sub-Section (i)]
Related Regulations: Foreign Exchange Management (Deposit) Regulations, 2016; Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015; Foreign Exchange Management (Non-Debt Instruments) Rules, 2019
Prior Amendments: FEMA 395(1)/2020-RB (Jun 15, 2020); FEMA 395(2)/2024-RB (Apr 19, 2024); FEMA 395(3)/2025-RB (Jan 15, 2025)
Disclaimer: This article is prepared for informational purposes only and does not constitute legal advice. Readers should refer to the original RBI notification and consult qualified FEMA professionals before acting on this information. CorpLawUpdates.in is not responsible for any action taken in reliance on this content.
