Rules 14 to 17 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.
Rules 14 to 17 of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 send two special classes of foreign investor to their own Schedules. "Other non-resident investors" such as sovereign wealth funds and pension funds go to Schedule V; a Foreign Venture Capital Investor (FVCI) goes to Schedule VII, which lists the ten sectors an FVCI may invest in and now lets an FVCI invest in a startup company in any sector. This article goes through Chapters VI and VII and both Schedules.
This article states the position as per the Rules notified on 17 October 2019 (S.O. 3732(E)) as amended by the notifications named in this article; the latest amendment consulted is S.O. 4870(E) dated 2 September 2026. Rules 14 to 17 and Schedule V stand as notified; none of the nineteen amending notifications changes them. In Schedule VII only paragraph (1), item (iii), was changed, by S.O. 3492(E) of 16 August 2024 (the fourth amendment of 2024). The Rules rest on section 46 of the Act; see our article on section 46 of the Foreign Exchange Management Act, 1999. Amendments after 2 September 2026 should be checked in the Gazette. For advice on a fund or venture investor entering India, our FEMA advisory service can help.
Rule 14 sends other non-resident investors to Schedule V; rule 16 sends an FVCI to Schedule VII; rules 15 and 17 deal with their transfers. Schedule V names long-term investors such as sovereign wealth funds, multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks, on terms set by the Reserve Bank and SEBI. Schedule VII lets an FVCI buy unlisted securities in ten listed sectors, units of venture capital funds and Category I AIFs, and equity or debt of a startup company in any sector, with sectoral caps applying if it is equity.
Rules 14 and 15: other non-resident investors
Rule 14 says other non-resident investors may make investments in securities in the manner and subject to the terms and conditions in Schedule V. Rule 15 says they, holding securities in accordance with the Rules, may transfer them subject to the terms and conditions in Schedule V and as specified by the Securities and Exchange Board of India and the Reserve Bank.
Schedule V
The Schedule is headed "(See Rule (14))" and "Investment by other non-resident investors". It has three paragraphs:
| Paragraph | What it says |
|---|---|
| (1) | Long term investors like Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds, Insurance Funds, Pension Funds and Foreign Central Banks may purchase securities subject to such terms and conditions as may be specified by the Reserve Bank and the Securities and Exchange Board of India |
| (2) | An "Eligible Foreign Entity (EEE)" as defined in a SEBI circular dated the 9th October 2018 and having actual exposure to the Indian physical commodity market may participate in domestic commodity derivative markets in accordance with the framework specified by SEBI |
| (3) | The mode of payment and other attendant conditions for remittance of sale or maturity proceeds shall be specified by the Reserve Bank |
The Rules set no cap, route or list of securities for these investors; they leave the terms to the Reserve Bank and SEBI. The SEBI circular named in paragraph (2) is not in the texts consulted, and nothing is said here about its content. The Master Direction - Foreign Investment in India, updated up to June 15, 2026, repeats the two permissions in its Annex 10. The Reserve Bank's Mode of Payment and Reporting Regulations carry a row for Schedule V; see our article on payments for NRIs, LLPs, FVCIs and convertible notes.
Rules 16 and 17: FVCI
Rule 16 says a Foreign Venture Capital Investor may make investments in the manner and subject to the terms and conditions in Schedule VII. Rule 17 says an FVCI holding equity instruments of an Indian company or units in accordance with the Rules, or a person resident in India, may transfer such equity instruments or units in compliance with the conditions, if any, in Schedule VII and as specified by SEBI and the Reserve Bank. Rule 17 therefore covers transfers by an FVCI and to an FVCI.
Schedule VII, paragraph (1)
Subject to the terms and conditions laid down by the Central Government, an FVCI may purchase:
- Item (i): securities issued by an Indian company engaged in any sector mentioned in paragraph (5) of the Schedule, whose securities are not listed on a recognised stock exchange at the time of issue.
- Item (ii): units of a Venture Capital Fund (VCF) or of a Category I Alternative Investment Fund (Cat-I AIF), or units of a scheme or fund set up by a VCF or a Cat-I AIF.
- Item (iii), as substituted by S.O. 3492(E): equity or equity linked instrument or debt instrument issued by an Indian startup company irrespective of the sector in which the startup company is engaged, with a proviso that if the investment is in equity instruments, then the sectoral caps, entry routes and attendant conditions shall apply.
The 2019 text of item (iii) spoke of an Indian "start-up" and defined it by a notification of the Department for Promotion of Industry and Internal Trade dated 11 April 2018. The substituted item uses the words "startup company"; the definition of that term is in rule 2(an) as substituted by S.O. 3492(E), explained in our article on Indian company, control, startup and investor classes.
Paragraphs (2) to (4)
- Paragraph (2): An FVCI may purchase the securities or instruments mentioned either from the issuer or from any person holding them. It may invest in securities on a recognised stock exchange subject to the Securities and Exchange Board of India (FVCI) Regulations, 2000, as the Rules print the name; check the current SEBI instrument.
- Paragraph (3): An FVCI may acquire, by purchase or otherwise, from, or transfer, by sale or otherwise, to, any person resident in or outside India, any security or instrument it is allowed to invest in, at a price that is mutually acceptable to the buyer and the seller or issuer. It may also receive the proceeds of the liquidation of VCFs or Cat-I AIFs or of schemes or funds set up by them.
- Paragraph (4): The mode of payment and other attendant conditions for remittance of sale or maturity proceeds shall be specified by the Reserve Bank of India.
The price rule in paragraph (3) is "mutually acceptable"; it names no valuation method and no pricing floor. For the general pricing rules for other non-resident investors, see our article on pricing of share transfers and swaps.
Paragraph (5): the ten sectors
Paragraph (5) lists the sectors in which an FVCI is allowed to invest under item (i):
| Item | Sector as printed |
|---|---|
| (a) | Biotechnology |
| (b) | IT related to hardware and software development |
| (c) | Nanotechnology |
| (d) | Seed research and development |
| (e) | Research and development of new chemical entities in pharmaceutical sector |
| (f) | Dairy industry |
| (g) | Poultry industry |
| (h) | Production of bio-fuels |
| (i) | Hotel-cum-convention centres with seating capacity of more than three thousand |
| (j) | Infrastructure sector, with the same meaning as in the Harmonised Master List of Infrastructure sub-sectors approved by the Government of India on 27 March 2012, as amended or updated |
The Master Direction restates the list and the other permissions in Annex 6 (paragraphs 1.2 to 1.9), and adds, as its own statements, that an FVCI's investment in equity instruments is subject to reporting, sectoral caps, entry routes and attendant conditions, and that "in case of sale to a person resident outside India, the buyer should be an eligible acquirer". The Rules do not print the second statement. It also states the consideration comes through banking channels from abroad or from a foreign currency account or Special Non-Resident Rupee account, and that sale or maturity proceeds, net of taxes, may be remitted or credited to those accounts. For tax on such proceeds, see our income-tax guides.
How the two classes differ
| Point | Schedule V investors | Schedule VII (FVCI) |
|---|---|---|
| Who | Sovereign wealth funds, multilateral agencies, endowment, insurance and pension funds, foreign central banks; certain eligible foreign entities for commodity derivatives | A Foreign Venture Capital Investor |
| What | "Securities", on terms of the Reserve Bank and SEBI | Unlisted securities in listed sectors; VCF and Cat-I AIF units; startup equity or debt |
| Sectoral cap | None printed | Sectoral caps apply to startup equity under the proviso to item (iii) |
| Proceeds | Mode of payment set by the Reserve Bank | Mode of payment set by the Reserve Bank |
A worked example
Mesa Pension Reserve, a foreign pension fund, wishes to buy securities of an Indian company. It is a Schedule V investor under paragraph (1), but the terms are those the Reserve Bank and SEBI specify; the Rules print none. Separately, Orchard Ventures, an FVCI, buys convertible debt of Pallu Robotics Private Limited, an Indian startup company, in a sector not among the ten. Item (iii) allows it in any sector. If Orchard had instead bought equity of Pallu, the sectoral caps, entry routes and attendant conditions would apply. The names are invented.
Need help with FVCI or fund investments in India?
Whether a venture fund qualifies under Schedule VII, and what the caps and routes mean for startup equity, are questions worth settling before the term sheet. Our FEMA advisory team can review the fund's status and the proposed instrument.
Key takeaways
- Rules 14 and 15 point other non-resident investors to Schedule V; rules 16 and 17 point FVCIs to Schedule VII.
- Schedule V sets no cap or route; the Reserve Bank and SEBI specify terms.
- Schedule VII item (iii) now covers startup equity or debt in any sector; equity remains subject to sectoral caps, entry routes and conditions.
- The ten sectors in paragraph (5) apply to unlisted securities under item (i).
- Mode of payment and proceeds are left to the Reserve Bank in both Schedules.
Read next
- Investment by NRI, OCI and other individuals: rules 12 and 13
- Investment in a limited liability partnership: Schedule VI
- Investment vehicles: AIF, REIT and InvIT, Schedule VIII
- FPI registration process and SEBI categories
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.