Foreign Investment Reporting Process

In alignment with the Indian Government’s continuing efforts to bolster foreign investment and ease of doing business in India, the Reserve Bank of India (RBI) has issued two important circulars in June 2018 with the aim of simplifying reporting under the Foreign Exchange and Management Act, 1999 (FEMA). The circulars are as follows:

Simplifying reporting under FEMA - RBI Circular

Currently all foreign investment transactions are reported in a complicated, disintegrated manner across various platforms/modes. The Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 (FEMA 20) provide for exhaustive reporting requirements for any foreign investment in India through 12 different forms[1]. Meeting these requirements had become a cumbersome process for foreign investors as well as Indian entities. 

Single Master Form[2]

Taking cognizance of this issue, the RBI via its ‘Statement on Developmental and Regulatory Policies’ dated April 5th, 2018 announced its plan to introduce an online reporting system for foreign investments by June 30th, 2018 via a Single Master Form (SMF) which would subsume most reporting requirements, irrespective of the instrument through which the foreign investment is made. Subsequently, in light of this policy announcement, RBI issued a circular[3] on June 7th, 2018 giving stakeholders a first glimpse of the draft SMF.

Salient features of the SMF

  • Online filing
  • Subsumes 8 of the existing 12 forms into one single master form:

Salient Features of the Single Master Form (SMF)

  • The format of the SMF can be divided into three parts. Whilst the first and third part are common for all reportings, the second part (consisting of forms) would vary depending upon the mode of investment.
  • The third part of the SMF contains certain requirements such as certificate from a company secretary (only required for Form FC-GPR currently), declaration by a non-resident transferor/transferee (only required for Form FC-TRS currently) etc. which have now been made common to all reporting.
  • The format SMF also provides for an additional reporting of investment by a non-resident in an investment vehicle in Form InVi, which is currently not required under FEMA 20.

Whilst the draft format of SMF has been released, it may be subject to further revision. The final form will be available on the RBI website in the RBI Master Direction on Reporting under FEMA shortly.

It is important to note that SMF is not a one stop form, and subsumes only 8 out of the existing 12 forms prescribed under FEMA 20. Indian entities will still need to separately file certain other forms such as ARF, FLA, Form LEC (FII) and Form LEC (NRI), irrespective of SMF coming into effect.

Entity Master Form[4]

Prior to implementation of SMF, the RBI would provide an interface to all Indian entities (companies, LLPs and start-ups) which have foreign investment in them, to provide data in respect of the total foreign investment they have received in a specified format. The interface will be available on RBI website from June 28th, 2018 to July 12th, 2018.

All Indian entities which do not comply with this pre-requisite will not be permitted to receive any foreign investment (including indirect foreign investment) going forward and will be declared non-compliant with FEMA.

Given the tight timeline within which the disclosure needs to be uploaded, RBI has released a format of the Entity Master Form (EMF) so as to enable Indian entities to keep all information ready in the interim. Other than the above, RBI has provided no further details on the EMF yet.

The EMF is in essence a diligence check being undertaken by the RBI on all Indian entities which have any form of foreign investment to ascertain whether they have complied with reporting requirements under FEMA till date.

RBI has initiated the EMF with the intent to consolidate all historical data of all form of foreign investment in all Indian entities in one single form (the EMF) and on one single platform (online).

External Commercial Borrowings – Revised Forms

Under FEMA, borrowers are required to report all ECB transactions to the RBI on a monthly basis through an AD Category – I Bank in the form of ‘ECB 2 Return’. The erstwhile ECB 2 Return required borrowers to furnish complete details of financial hedge contracted by them with regard to principal and coupon including specific information regarding currency swap, forward, options, interest rate swap etc.

RBI via a circular[5] dated June 7th, 2018, has simplified the format of Part E of Form ECB 2 Return. The revised ECB 2 Return simplifies disclosure of hedging details into two baskets – financial and natural and requires disclosure of only the following:

  1. Outstanding principal ECB amount and the currency thereof;
  2. Notional value and percentage of outstanding ECB amount of financial hedge(s) as well as natural hedge; and
  3. Annualised percentage cost of financial hedge(s) for ECB.

There is a further requirement to disclose annual Earnings before Interest and Depreciation in the disclosures with regard to foreign exchange earnings and expenditure for the last 3 financial years.

From the end of June 2018, monthly reporting of ECBs will need to be made in the revised format of Form ECB 2 Return. Any lapse with regard to the following would tantamount to a contravention of FEMA provisions:

  1. the time of reporting through this return; and/or
  2. failure to adhere to the timeline of its submission; and/or
  3. the time of reporting through Form 83 (reporting of loan agreement details under FEMA).

Important – Next Steps

It is important to note that submission of the EMF is a one-time requirement and separate from the SMF. Given that the penalty for not filing the EMF within the prescribed timeline is (presently) a prohibition on receiving any form of foreign investment, all Indian entities, joint venture companies, subsidiaries etc. should prepare for filing of the EMF on war footing.

Foreign investors need to be mindful as well since any non-compliance by an Indian entity in which they have any investment will mean that they will no longer be allowed to make any further investment in such non-compliant Indian entity.


Currently, India is ranked 100 on World Bank’s Ease of Doing Business Index. The latest revamp of reporting requirements under FEMA is expected to have a positive impact on India’s ranking on the index and improve its Distance to Frontier[6] which is currently measured at 60.76.

RBI’s latest initiative is expected to be a source of much relief for foreign investors. Investors can now expect greater uniformity and transparency in the Indian market.

[1] Regulation 13 of FEMA 20 provides for the following reporting requirements: (i) Advance Remittance Form; (ii) Form FC-GPR; (iii) Form FC-TRS; (iv) Annual Return on Foreign Labilities and Assets (FLA); (v) Form Employees’ Stock Option, (vi) Form Depository Receipt Return; (vii) Form LLP (I); (viii) Form LLP (II); (ix) Form LEC (FII); (x) Form LEC (NRI); (xi) Form Convertible Notes; and (xii) Form Downstream Investment.


[3] RBI Circular on Foreign Investment in India – Reporting in Single Master Form (RBI/2017-18/194 A.P (DIR Series Circular No.30);


[5] RBI Circular on External Commercial Borrowings – Monthly Reporting through ECB 2 Return (RBI/2017-18/193 A. P. (DIR Series) Circular No. 29)

[6] The World Bank’s distance to frontier (DTF) measure shows the distance of each economy to the “frontier,” which represents the best performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s distance to frontier is reflected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier.