Step 1: Identify the FEMA Regulation Applicable
First, determine which FEMA regulation applies, such as:
- FEMA (Non-Debt Instruments) Rules, 2019
- FEMA (Debt Instruments) Rules, 2019
- FEMA (Acquisition & Transfer of Immovable Property) Regulations
- FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations
Correct identification is critical, as approval authority and documentation depend on this.
Step 2: Confirm Whether Automatic Route Is Not Available
Before applying:
- Check if the transaction exceeds sectoral caps
- Verify pricing/valuation non-compliance
- Identify prohibited or conditional activities
- Confirm if RBI approval is explicitly required
Only transactions not eligible under automatic route require prior permission.
Step 3: Prepare a Detailed Application Note
Draft a comprehensive justification note, covering:
- Nature of transaction
- Parties involved (Resident / NRI / OCB)
- Amount and mode of payment
- FEMA provisions under which approval is sought
- Commercial rationale for the transaction
- Confirmation of compliance with other laws (Companies Act, Income Tax Act, etc.)
This note is the foundation of the RBI application.
Step 4: Collect Required Documents
Common documents include:
Applicant & Party Documents
- PAN of resident entity
- Passport & NRI status proof
- Incorporation documents (Company/LLP)
- Board resolution approving the transaction
Transaction Documents
- Share purchase/transfer agreement
- Valuation report (from CA / Merchant Banker)
- Payment details & source of funds
- Existing shareholding pattern
Compliance Declarations
- FEMA compliance declaration
- KYC report (from AD Bank)
- Undertaking for post-approval reporting
Documents vary depending on transaction type.
Step 5: Approach Authorized Dealer (AD) Bank
RBI does not accept direct applications in most cases.
Steps include:
- Submit application and documents to your Authorized Dealer (AD Category-I Bank)
- AD Bank reviews FEMA compliance
- Bank forwards the application to RBI with recommendations
Your bank acts as the official intermediary.
Step 6: Filing Application with RBI (Online / Email Mode)
Depending on the transaction, the AD Bank files:
- Online via FIRMS / RBI portal (where applicable)
- Email-based submission to the RBI Foreign Exchange Department
- Physical submission (rare legacy cases)
The application is routed to the relevant RBI Regional Office.
Step 7: RBI Scrutiny & Clarifications
RBI may:
- Seek additional documents
- Ask for revised valuation
- Request clarifications on structure or pricing
- Ask for undertakings or compliance confirmations
Timely response is crucial to avoid rejection or delays.
Step 8: Grant of FEMA Prior Approval
If satisfied, RBI issues:
- Written approval letter
- Specific conditions to be followed
- Time limit for executing the transaction
Approval is usually transaction-specific and time-bound.
Step 9: Execute the Transaction
After approval:
- Complete the transaction strictly as approved
- Follow payment routing through permitted banking channels
- Ensure pricing, timelines, and structure match RBI approval
Any deviation may require fresh approval.
Step 10: Post-Transaction FEMA Reporting
Mandatory filings include (as applicable):
- FC-TRS
- FC-GPR
- FDI Annual Return
- Property transaction reporting
- Any RBI-specified compliance submission
These filings must be completed within prescribed timelines.
Timelines for RBI Approval
- Simple cases: 4–6 weeks
- Complex or high-value cases: 8–12 weeks or more
Delays usually occur due to incomplete documentation or non-compliance.
Key Points to Remember
- RBI approvals are case-specific, not general
- OCB-related cases receive higher scrutiny
- Valuation and sectoral compliance are critical
- AD Bank coordination is essential
- Post-approval compliance is mandatory
Conclusion
FEMA prior permission from RBI is a sensitive and technical process requiring precise compliance with foreign exchange laws. Proper structuring, documentation, and coordination with the AD Bank are key to securing timely approval.
Professional assistance ensures reduced risk, faster processing, and full FEMA compliance.
Disclaimer
This content is provided for general informational purposes only and does not constitute legal or professional advice. FEMA regulations, RBI policies, and approval requirements are subject to change. Readers are advised to consult authorized professionals or their AD Bank before initiating any FEMA-regulated transaction. Saving Mantra shall not be responsible for any decisions taken based on this information.