The Reserve Bank of India (“RBI”), the nodal authority for determining rules and regulations concerning foreign investment in India, has recently released the draft Foreign Exchange Management (Foreign Investment) Rules, 2026 (“Draft Rules”), to replace the existing Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (“2019 NDI Rules”). The draft rules are currently open for public comments till 31st August, 2026.

In this article, we discuss how the draft rules differ from the existing statutory framework.

The big picture: from a self-contained code to a layered architecture

The most consequential change in the Draft Rules is not any single definition — it is the architecture of the regulation itself.

The 2019 NDI Rules were a self-contained code. They ran to 33 substantive rules across nine chapters, followed by ten detailed Schedules covering everything from FPI investment limits to immovable property acquisition. Sectoral caps, entry routes and prohibited sectors were embedded directly in Schedule I as part of the delegated legislation itself — meaning any tweak to a sectoral cap required a Gazette amendment to the Rules.

The 2026 draft strips this down to nine rules, organised across four short chapters, followed by three Annexures:

• Annexure-I — the international listing scheme (retained in substance)
• Annexure-II — the “Foreign Investment Policy (FDI Policy),” expressly described as “issued by the Government of India, as amended from time to time”
• Annexure-III — RBI regulations and directions

In effect, the draft externalises the sectoral caps, entry routes, sectoral conditions and prohibited-sector list from the Rules into a separately issued and separately amendable Policy document, while pushing operational/procedural detail (reporting, payment modes, pledge mechanics, etc.) into RBI directions.

Read the Full article on Mondaq: https://www.mondaq.com/india/inward-foreign-investment/1829802/decoding-indias-proposed-foreign-investment-regime