RBI Amends Forex Regulations To Ease Startup Recognition And Align With DPIIT's Definition

The Reserve Bank of India has amended its foreign exchange management regulations to align with the definition of startups according to the revised standards, in another move to provide them ease while doing business.

Via a gazette dated Nov. 19, the RBI amended its Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) (Fourth Amendment) Regulations, 2024 to include the revised definition of startups, which was issued by the Department for Promotion of Industry and Internal Trade in 2019.

According to Mayank Arora, Regulatory Director at Nangia Andersen India, this is part of a number of recent amendments to harmonise the definition of startups.

"A number of amendments have been made to FEMA notifications this year—including amendments to FEM (Non-Debt Instruments) Rules, 2019. The recent amendment is in line with the effort to harmonise the definition of startup as per the latest notification issued by DPIIT," Arora said.

DPIIT through its 2019 notification had liberalised the definition of a startup. Earlier, a company could be designated as a startup for only five years. This has been later relaxed to 10 years from its date of incorporation. Also, a higher turnover threshold of Rs 100 crore was put in place, compared to Rs 25 crore earlier.

"The recent amendment... would remove ambiguity among authorised dealer banks while allowing opening of foreign currency bank accounts of DPIIT recognised startups," Arora added.