RBI Simplifies Fast-Track Cross-Border Mergers
Updated: Aug 7
On 29 May 2026, the Reserve Bank of India ("RBI") notified the Foreign Exchange Management (Cross Border Merger) (Amendment) Regulations, 2026 ("Amendment Regulations"), which came into force on 5 June 2026. The Amendment Regulations amend the Foreign Exchange Management (Cross Border Merger) Regulations, 2018 ("Cross Border Merger Regulations"), issued under the Foreign Exchange Management Act, 1999 ("FEMA"), to align India's foreign exchange framework with the corporate restructuring regime under the Companies Act, 2013 ("Companies Act").
Position Prior to the Amendment Regulations
The Companies Act provides 2 routes for mergers as set out below:
Conventional route under Sections 230 to 232, under which schemes of compromise, arrangement and amalgamation are sanctioned by the National Company Law Tribunal ("NCLT").
Fast-track merger mechanism under Section 233 read with Rules 25 and 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 ("CAA Rules"), under which specified classes of companies may merge with the approval of the central government through the regional director.
In September 2024, the Ministry of Corporate Affairs amended Rule 25A of the CAA Rules to permit inbound mergers, whereby a foreign company merges into an Indian company, through the fast-track route, subject to prior RBI approval. The expanded framework now covers small companies, start-ups, certain unlisted companies, holding companies and their wholly owned subsidiaries, fellow subsidiaries, and foreign holding companies merging into their Indian wholly owned subsidiaries.
The Regulatory Gap
Although company law recognised fast-track inbound mergers, the Cross Border Merger Regulations continued to refer only to schemes sanctioned by the NCLT.
Consequently, Regulations 4, 5, 7 and 9 linked important post-merger consequences including disposal of assets and liabilities, payment of consideration by the resultant company, and deemed RBI approval to NCLT approved schemes. This created uncertainty regarding the availability of these benefits for fast-track mergers approved by the Regional Director.
The Amendment Regulations
The RBI has now addressed this inconsistency through 3 key amendments:
Omission of Regulation 2 (vii);
Insertion of Regulation 2 (iia), defining "Competent Authority" as any authority empowered under the Companies Act or subordinate legislation to approve a scheme of merger or amalgamation; and
Substitution of the term "NCLT" with "Competent Authority" in Regulations 4, 5, 7 and 9.
The Amendment Regulations significantly facilitate reverse flips, whereby Indian-founded groups with offshore holding structures re-domicile their parent company by merging it into an Indian subsidiary.
Fast-track inbound mergers approved by the regional director now enjoy the same treatment under the Cross Border Merger Regulations as NCLT-approved mergers. Accordingly, timelines for asset and liability transfers, payment of consideration by the resultant company and deemed RBI approval are available irrespective of whether the merger is approved by the NCLT or another Competent Authority.
The amendments also advance the Government's objective of encouraging businesses to consolidate operations in India, simplify corporate reorganizations and improve access to Indian capital markets.
Conclusion
The Amendment Regulations eliminate a significant inconsistency between the Companies Act and FEMA by recognizing merger schemes approved by any Competent Authority, rather than only the NCLT.
The changes provide greater certainty for inbound mergers, simplify cross-border reorganizations and make fast-track reverse flips a more practical option for Indian-founded groups with offshore holding structures.
Key Takeaways
FEMA and company law are now aligned. Merger schemes approved by any authority empowered under the Companies Act are recognised under the Cross Border Merger Regulations.
Fast-track inbound mergers receive full FEMA recognition. Schemes approved by the Regional Director now enjoy the same regulatory treatment as NCLT-approved mergers.
Reverse flips become easier. The amendments reduce procedural complexity and regulatory uncertainty for Indian businesses seeking to re-domicile offshore holding companies.
Cross-border restructurings are simplified. The reforms strengthen India's ease of doing business by harmonizing the corporate and foreign exchange regulatory frameworks.
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