Rule 10 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 10 of the Foreign Exchange Management (Overseas Investment) Rules, 2022 stops three kinds of person from making a financial commitment overseas, or from disinvesting, without first obtaining a No Objection Certificate (NOC) from the lender bank, the regulator or the investigating agency. The three are borrowers whose account is a non-performing asset, persons classified as wilful defaulters, and persons under investigation by a financial service regulator or named agencies. This article reads both sub-rules and the Reserve Bank's Master Direction on the point.
The Rules are quoted as notified on 22 August 2022 (G.S.R. 646(E)); no amendment is in the texts consulted. Amendments after that date should be checked in the Gazette. The Rules rest on section 46 of the Foreign Exchange Management Act, 1999; see our article on section 46 of the Act. Our overseas direct investment reporting service covers the filings that follow once the certificate is in hand.
A person resident in India whose account is a non-performing asset, who is classified as a wilful defaulter by any bank, or who is under investigation by a financial service regulator or by the Central Bureau of Investigation, the Directorate of Enforcement or the Serious Frauds Investigation Office, must obtain an NOC from the lender bank, regulatory body or agency before making any financial commitment or undertaking disinvestment. If the body does not furnish the certificate within sixty days of receiving the application, it may be presumed that there was no objection. The NOC is addressed to the designated AD bank, with an endorsement to the applicant.
Sub-rule (1): who needs an NOC and when
Rule 10(1) applies to "any person resident in India who":
| Clause | Condition |
|---|---|
| (i) | Has an account appearing as a non-performing asset |
| (ii) | Is classified as a wilful defaulter by any bank |
| (iii) | Is under investigation by a financial service regulator or by investigative agencies in India, namely the Central Bureau of Investigation, the Directorate of Enforcement or the Serious Frauds Investigation Office |
Such a person "shall, before making any financial commitment or undertaking disinvestment under these rules or the Foreign Exchange Management (Overseas Investment) Regulations, 2022, obtain a No Objection Certificate from the lender bank or regulatory body or investigative agency by making an application in writing to such bank or regulatory body or investigative agency concerned".
Three points follow from the words:
- The NOC is needed for two kinds of act: making a financial commitment, and undertaking disinvestment. The Rules do not require it for other acts.
- Rule 2(1)(g) defines "financial service regulator" as one established under any law in force in India, including the Reserve Bank, the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and the Pension Fund Regulatory and Development Authority. The three investigative agencies in clause (iii) are named in the rule itself.
- "Financial commitment" has the meaning in rule 2(1)(f); see our article on ODI, OPI, financial commitment and control.
The proviso: sixty days
The proviso says that where the lender bank or regulatory body or investigative agency concerned fails to furnish the certificate within sixty days from the date of receipt of the application, it may be presumed that there was no objection to the proposed transaction. The text uses "may be presumed". It does not say who makes the presumption or in what form the presumption is evidenced; the Rules are silent on that, and no procedure is added here.
Sub-rule (2): to whom the NOC is addressed
Rule 10(2) says the NOC issued under sub-rule (1) shall be addressed by the lender bank or regulatory body or investigative agency concerned to the designated AD bank, with an endorsement to the applicant. The designated AD bank is the bank through which the person makes the overseas investment; the Rules define an AD bank in rule 2(1)(b) as a person authorised under section 10(1) of the Act, and for these Rules only its domestic branches.
What the Master Direction says
The Master Direction - Overseas Investment, updated as on April 01, 2026, restates the rule in its paragraph 6 and adds a second sub-paragraph. These are the Reserve Bank's statements to banks.
- Paragraph 6(1) says any person resident in India having an account appearing as a Non-Performing Asset (NPA), or classified as a wilful defaulter, or under investigation by a financial sector regulator or an investigative agency, shall obtain an NOC from the lender bank or regulatory body or investigative agency concerned, in accordance with rule 10 of the Rules, before making a financial commitment or undertaking disinvestment.
- Paragraph 6(2) says that where an Indian entity has already issued a guarantee in accordance with the FEMA provisions before an investigation has begun, or before the account is classified as NPA or wilful defaulter, and subsequently is required to honour that contractual obligation, the remittance due to the invocation will not constitute fresh financial commitment, and hence an NOC shall not be required.
The second statement is the Reserve Bank's clarification; the Rules do not print it. For guarantees as financial commitment, see our article on guarantees for a foreign entity under regulation 5. The Master Direction's paragraphs 1 to 6 are explained in our article on the automatic route, approval route and NOC.
How it fits with the rest of the Rules
Rule 10 is a gate on top of the permissions. Rule 9 allows overseas investment in a foreign entity engaged in a bona fide business activity; Schedule I allows an Indian entity to make ODI in the manner it prescribes. Rule 10 adds that, where the person falls into one of the three groups, the permission is not available until the NOC is on file. The approval route, where a Reserve Bank or Central Government approval is needed, is a separate matter; see our article on rules 7 and 9. The Regulations' late submission fee and bar on further commitment are separate consequences of delay in reporting and are not NOC rules; see our article on regulations 11 and 12.
A worked example
Harcourt Fabrication Private Limited has an account that appears as a non-performing asset with its lender bank. It wants to put further money into its foreign subsidiary. Under rule 10(1)(i) it first applies in writing to the lender bank for an NOC. If the bank does not furnish the certificate within sixty days of receiving the application, the proviso says it may be presumed that there was no objection. When the bank issues the NOC, it is addressed to Harcourt's designated AD bank, with an endorsement to Harcourt. Separately, if Harcourt had given a guarantee for the subsidiary before its account turned non-performing, the Master Direction says honouring that guarantee is not a fresh financial commitment and needs no NOC. The names are invented.
Need help with an overseas investment when an NOC is in question?
An NOC request to a lender or an agency needs to be framed clearly and on record, and the sixty days run from the date of receipt of the application. Our overseas direct investment reporting team can prepare the application and track the certificate with you.
Key takeaways
- Three triggers: NPA account, wilful defaulter classification, investigation by a financial service regulator or by the CBI, the Directorate of Enforcement or the SFIO.
- The NOC is needed before a financial commitment or disinvestment under the Rules or Regulations.
- Sixty days of silence from the lender or agency allows a presumption of no objection.
- The NOC goes to the designated AD bank with an endorsement to the applicant.
- Per the Master Direction, honouring a guarantee issued before the trigger is not fresh financial commitment.
Read next
- Bona fide business activity and approval powers: rules 7 and 9
- Pricing, transfer and liquidation: rules 16 and 17
- Scope, administration and exclusions: rules 1, 3, 4, 6, 8 and 20
- Overseas direct investment under FEMA
Disclaimer: Based on the Gazette text of the instrument this article names, as notified and as amended by the notifications named in the article (for the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 the latest amendment consulted is S.O. 4870(E) dated 2 September 2026), as consulted on 2 October 2026. There is no official consolidated text; the provisions were read with each amendment applied. Sectoral caps, entry routes, conditions, forms and time limits change by notification, press note and circular; later changes should be checked on the Gazette, DPIIT and Reserve Bank sites. This article is general information, not legal advice; check the official text before acting.