Research and Articles

This is the April edition of Nishith Desai Associates’ monthly financial services newsletter in collaboration with U.S.-India Business Council.

INTRODUCTION

The first quarter of 2026 reinforced India’s position as one of the world’s fastest-growing major economies, supported by resilient domestic demand, moderating inflation, and sustained policy support. Real GDP growth for the financial year (“FY”) 2025-26 was projected to remain robust at around 6.8-7.3%¹, with several global institutions forecasting growth of approximately 6.9% in 2026², reflecting continued strength in consumption, infrastructure spending, and investment activity. Despite periodic volatility in global commodity and crude oil markets driven by geopolitical developments, inflation has remained well within the Reserve Bank of India’s (“RBI”) target range. Consumer Price Index (“CPI”) inflation softened from 4.26% in January 2025 to 0.71% in November 2025, and the RBI has projected average inflation for FY 2025–26 at around 2%, comfortably within its 2–6% tolerance band³. Overall, India’s macroeconomic stability and policy steadiness have continued to reinforce investor confidence and sustain momentum across markets.

That said, the first quarter of 2026 has not come without its many challenges. Ongoing geopolitical tensions and regional conflicts continue to shape the global economic landscape, with implications for energy markets, supply chains, and capital flows. Elevated uncertainty has contributed to volatility in commodity prices and heightened risk aversion among global investors, particularly across emerging markets. The long-term effects may be seen across the coming quarter.

Nishith Desai Associates (“NDA”), in collaboration with the U.S.-India Business Council (“USIBC”), is pleased to launch this edition of our quarterly financial services roundup titled “The Financial Services Bulletin”. Through this publication, we aim to cull out key developments in the financial services industry that, in our view, “summarize the quarter”. Our roundup has been meticulously curated into two parts: Part I provides updates from the broader business world, ensuring that key developments relevant to our stakeholders are concisely discussed, while Part II covers key legal and regulatory developments in the financial services industry.

PART I – BUSINESS AND NEWS UPDATES

TRADES, TRENDS, AND LITIGATION

1. Ongoing Iran conflict and its impact on Indian markets.

The ongoing conflict in Iran has emerged as a key macroeconomic risk in the first quarter of 2026, significantly impacting energy security, inflation, and Indian financial markets. India imports over 80% of its crude oil requirements, with a significant proportion routed through the Strait of Hormuz, a critical transit route for nearly 20–30% of global oil and gas supplies⁴.

The most immediate impact has been a sharp increase in crude oil prices, which has translated into a higher import bill, widening of the current account deficit, and pressure on the Indian rupee. Even marginal increases in crude prices materially affect India’s external balance, with knock-on effects on fiscal management and inflation expectations.⁵ Domestically, higher energy costs are feeding into broader inflationary pressures across sectors, including transportation, manufacturing, aviation, and fertilizers, thereby increasing input costs and compressing margins.⁶ This has coincided with heightened volatility in Indian equity markets, with risk-off sentiment leading to foreign portfolio outflows and sharp corrections across indices.⁷

From a macroeconomic standpoint, while India has some buffer through diversified sourcing and strategic reserves, the persistence of elevated oil prices poses risks to consumption, corporate profitability, and monetary policy flexibility. Overall, the conflict underscores India’s structural sensitivity to global energy shocks, with inflation management, currency stability, and capital flows emerging as key areas of concern in the near term.

2. RBI holds a meeting of the Monetary Policy Committee (“MPC”) for its first monetary policy review of the calendar year 2026

At its February 2026 MPC meeting, RBI retained a status‑quo stance, signalling comfort with current macro conditions while keeping options open for further easing if data warrants. The key takeaways from the meeting are:

• Repo Rate: The repo rate was left unchanged at 5.25%, with the Standing Deposit Facility (SDF) at 5.00%, Marginal Standing Facility (MSF) and Bank Rate also held constant at 5.50%.

• The RBI projects CPI inflation at 2.1% for FY 2025‑26, with a gradual rise to around 4.0–4.2% in Q1–Q2 of FY 2026‑27, reflecting base‑effect‑driven upticks rather than broad‑based price pressures.

• Real GDP growth is seen around 7%–7.4% for FY 2025‑26, with the RBI highlighting resilient domestic demand, contained core inflation, and adequate external buffers as key positives.

3. India Exim Bank (as defined below) raises USD 1 Billion through landmark dual-tranche bond issuance⁸.

Export-Import Bank of India (“India Exim Bank”) has raised USD 1 billion through a dual-tranche senior unsecured bond issuance in the international capital markets under the Regulation 144A/Reg-S format, comprising a USD 500 million 10-year tranche and a USD 500 million 30-year tranche. The transaction marks the first-ever 30-year USD bond issued by an Indian banking financial institution, setting a new benchmark for Indian issuers in global debt markets. The bonds were priced at 85 basis points over the 10-year U.S. Treasury and 95 basis points over the 30-year U.S. Treasury, representing the lowest spreads achieved by any Indian issuer for these tenors in public USD bond markets.

The issuance attracted strong global demand, with the order book reportedly exceeding USD 8 billion and investors participating across Asia, the United States, and EMEA. This landmark issuance strengthens India Exim Bank’s presence in international capital markets and reflects sustained global investor confidence in India’s financial institutions and long-term economic outlook.

4. CCI imposes penalty on Intel for abuse of dominant position in microprocessor market.

The Competition Commission of India (“CCI”), by order dated February 12, 2026⁹, imposed a penalty of INR 27.38 crore on Intel Corporation for abuse of dominant position under Section 4 of the Competition Act, 2002. The case arose from a complaint by Matrix Info Systems Pvt. Ltd., which challenged Intel’s “India Specific Warranty Policy” introduced in 2016 for boxed microprocessors. The CCI found that the policy restricted warranty services in India to products purchased from Intel’s authorised Indian distributors, thereby disadvantaging parallel importers and limiting consumer choice. The CCI held that the policy constituted unfair and discriminatory conduct, restricted market access for parallel importers, and limited competition in the market for boxed microprocessors for desktop PCs in India. While imposing the penalty, the CCI also noted that Intel had withdrawn the policy with effect from April 1, 2024.

5. HDFC Bank’s part-time Chairman Atanu Chakraborty resigns¹⁰

HDFC Bank announced the resignation of its part-time Chairman, with his resignation letter indicating that the decision stemmed from differences over “values and ethics”. The bank has clarified that its core management team and business operations remain unaffected, and that the process for identifying and appointing a successor will be undertaken in accordance with applicable regulatory requirements.

RBI has engaged with the bank following the development and has emphasised that the institution continues to remain well-capitalised, compliant with prudential norms, and operationally stable. Further, RBI has also approved the appointment of Keki Mistry as interim part-time Chairman for a three-month period starting March 19, 2026.

PART II – LEGAL AND REGULATORY UPDATES

FINANCIAL SERVICES

Vaibhav Parikh (New York)

Viral Mehta (Mumbai-BKC)

Nishchal Joshipura (Mumbai-BKC)

1. The Supreme Court of India (“SC”) ruling in Tiger Global International II Holdings reshapes treaty entitlement and the General Anti-Avoidance Rules (“GAAR”) landscape.

In Tiger Global International II Holdings¹¹, the SC clarified that a Tax Residency Certificate (“TRC”) is not conclusive proof of eligibility for treaty benefits under the India–Mauritius Double Taxation Avoidance Agreement (“Mauritius Treaty”)¹². The SC held that tax authorities are entitled to examine surrounding facts, including effective control and decision-making, to determine whether treaty benefits should be granted. It further held that the grandfathering protection from GAAR under CBDT Circular No. 7 of 2017¹³ does not extend to pre-2017 investments that are exited post-2017, if such arrangements are found to be impermissible avoidance arrangements.

On treaty interpretation, the SC observed that Article 13(4) of the Mauritius Treaty does not cover indirect transfers undertaken through the sale of shares of an offshore holding company. Accordingly, gains arising from the sale of shares of Flipkart Singapore, deriving substantial value from Flipkart India, were held to be taxable in India, and treaty protection was denied.

Subsequently, the Central Board of Direct Taxes (“CBDT”) issued Notification Nos. 54/2026¹⁴ and 55/2026,¹⁵ amending Rule 10U of the Income-tax Rules, 1962 and Rule 128 of the Income-tax Rules, 2026, with effect from April 1, 2026, to clarify that the grandfathering protection from GAAR extends to income arising from the transfer of investments made prior to April 1, 2017, even where the corresponding tax benefit arises after that date. The explanatory memorandum to the amendment of Rule 10U further clarifies that the provisions of Chapter X-A shall not be invoked on or after the date of publication of the rules in the Official Gazette in respect of such income.

The ruling, read with the subsequent regulatory response, marks a nuanced shift in India’s treaty jurisprudence. While TRCs no longer operate as a safe harbour and substance-based scrutiny remains central to treaty entitlement, the restoration of GAAR grandfathering for pre-2017 investments provide a measure of certainty for legacy structures.

2. Government of India recalibrates Foreign Direct Investment (“FDI”) restrictions for land-bordering countries under Press Note 3 (2020 Series) (“PN3”).

In a long-awaited move, the Union Cabinet of India has approved amendments to the PN3 through a Press Release dated March 10, 2026¹⁶, followed by Press Note 2 (2026 Series) dated March 15, 2026¹⁷, revising the regulatory framework governing FDI from countries sharing land borders (“LBCs”) with India. Pertinently, under the revised framework, investments involving non-controlling beneficial ownership from LBCs within prescribed thresholds, as determined on a look-through basis, are now permitted under the automatic route (i.e. will not require prior clearance of the Government of India), subject to existing sectoral caps and other FDI conditions that may otherwise be applicable to investments in this sector.

That said, any direct investments by entities or citizens of LBC jurisdictions continue to require prior Government of India approval, irrespective of the size of the investment.

Separately, the amendments also align the definition of “beneficial owner” with the thresholds under the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, providing greater clarity in determining beneficial ownership.

Additionally, FDI proposals from LBCs in specified manufacturing sectors, including capital goods, electronic components, polysilicon and wafer manufacturing, will be subject to expedited government approval within 60 days. However, this will remain subject to the condition that Indian investee companies seeking to avail this fast-track mechanism ensure that majority shareholding and control always remain with resident Indian citizens or Indian entities, i.e., Indian Owned and Controlled Companies (IOCC). 

Lastly, investee entities will be required to report all investments from LBCs to the Department for Promotion of Industry and Internal Trade (DPIIT) in a prescribed manner.

These amendments aim to provide greater clarity in the Press Note 3 regime while facilitating legitimate minority investments and maintaining national security safeguards. A detailed analysis of the revised framework can be found here.

3. RBI revises Voluntary Retention Route framework for FPI debt investment to enhance predictability and ease of doing business¹⁸.

The RBI has introduced amendments to the regulatory framework governing the Voluntary Retention Route (“VRR”) for Foreign Portfolio Investor (“FPI”) investments in debt instruments. The changes modify Part III of the Master Direction – Non-resident Investment in Debt Instruments Directions, 2025¹⁹ and aim to simplify the investment framework and provide greater flexibility to FPIs.

Few of the key provisions of the circular are as follows:

• Integration of VRR limits with the General Route: Earlier, VRR operated as a separate investment channel with its own dedicate investment limit of INR 250,000 crores or higher (if notified by the RBI). Under the revised framework, investment limits for VRR will now be subsumed within the overall investment limits applicable to FPIs under the General Route, which is the standard route through which FPIs invest in Indian debt securities. Consequently, investments made through VRR in Central Government securities (including Treasury Bills), State Government securities, and corporate debt securities will be counted within the respective General Route limits. In effect, while the VRR route is not per se barred / eliminated, the investment limit applicable to the VRR route are now removed for FPIs.

• Flexibility to FPIs to exit VRR: FPIs that had committed to retention periods longer than the prescribed minimum retention period will now have the option to liquidate their portfolio, either fully or partially, and exit the VRR after completion of the minimum retention period.

• Transition of existing VRR investments: With effect from April 01, 2026, all existing investments under the VRR will be transferred to the corresponding investment limits under the General Route, thereby aligning the regulatory treatment of VRR investments with the broader FPI investment framework.

These amendments are expected to simplify the investment framework for FPIs, reduce regulatory fragmentation between investment routes, and enhance flexibility for foreign investors participating in India’s debt markets. Our detailed update on this development is available here.

4. RBI issues Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, replacing the earlier export regulations framework.

The RBI has notified the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026²⁰, which will come into force on October 01, 2026. These regulations replace the earlier Foreign Exchange Management (Export of Goods and Services) Regulations, 2015²¹ and establish a consolidated framework governing foreign exchange transactions related to exports, imports, and merchanting trade. The regulations prescribe procedures relating to export declarations, timelines for realisation of export proceeds, import payments, advance remittances, and reporting obligations under FEMA.

Few of the key provisions of the regulations are as follows:

• Export declaration requirements: Exporters of goods and services are required to submit an Export Declaration Form (EDF) specifying the full export value of the transaction. For services exports, the EDF must generally be submitted within 30 days from the end of the month in which the invoice is raised, with authorised dealers permitted to extend this timeline upon request.

• Revised timelines for realisation of export proceeds: Export proceeds must generally be realised and repatriated within 15 months from the date of shipment (for goods) or invoice (for services). Where exports are invoiced or settled in Indian Rupees, the realisation period is extended to 18 months from the date of shipment in case of goods (other than goods exported to a warehouse outside India), from the date of invoice in case of services, and from the date of sale of goods in case of goods exported to a warehouse outside India. Authorised dealer banks may allow extensions where justified, upon their satisfaction.

• Operational flexibility for exporters and importers: The regulations permit set-off of export receivables against import payables, allow third-party payments in trade transactions, and enable authorised dealers to approve reductions in export realisation amounts where justified by commercial circumstances and within stipulated circumstances.

• Framework for advance payments and trade monitoring: Authorised Dealer banks must verify the genuineness of export and import transactions, monitor trade through Export Data Processing and Monitoring System (EDPMS) and Import Data Processing and Monitoring System (IDPMS), and follow up on realisation of export proceeds and settlement of import payments within prescribed timelines.

The EDPMS and IDPMS are reporting requirements under the revised regulations, to be made to the authorised dealer.

• Merchanting trade and trade settlement provisions: The regulations also provide a framework for Merchanting Trade Transactions (MTT), requiring that both legs of the trade be completed within six months, and allow trade invoicing and settlement in Indian Rupees in accordance with existing RBI guidelines.

• Import of gold and silver:No advance remittance continues to be permitted for import of gold or silver.

These regulations modernise and consolidate the FEMA framework governing cross-border trade transactions, streamline reporting and compliance requirements for exporters and importers, and provide greater operational clarity for Authorised Dealer banks supervising foreign exchange trade flows.

5. RBI mandated Unique Transaction Identifier (“UTI”) framework for OTC derivate transactions²².

The RBI has issued directions mandating the use of a UTI for over the counter (“OTC”) derivative transactions, with the objective of improving transparency and enabling regulators to obtain a comprehensive view of the OTC derivatives market. Currently, transactions in OTC markets, such as rupee interest rate derivatives, forward contracts in government securities, foreign currency derivatives, foreign currency interest rate derivatives, and credit derivatives, are reported to the Trade Repository maintained by the Clearing Corporation of India Limited (“CCIL-TR”). The new framework introduces mandatory UTI generation and reporting for such transactions. The directions will come into effect from January 01, 2027, and will apply to all OTC derivative transactions entered into on or after that date.

Few of the key provisions of the directions are as follows:

• Mandatory generation of UTI for OTC derivatives: A UTI must be generated and reported for all OTC derivative transactions undertaken under the relevant governing directions relating to foreign exchange derivatives, rupee interest rate derivatives, credit derivatives, and forward contracts in government securities. The identifier will allow regulators to track transactions across their lifecycle and strengthen oversight of derivatives markets.

• Standardised global UTI format: The UTI must follow the technical guidance issued by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO). Each UTI may contain up to 52 characters and will comprise the Legal Entity Identifier (LEI) of the generating entity followed by a unique transaction-specific code.

• Lifecycle treatment of UTIs: Amendments to a reported derivative contract will not require generation of a new UTI. However, lifecycle events that create a new reportable derivative contract (such as novation) will require a fresh UTI to be generated for the new transaction.

The framework aims to enhance transparency, improve regulatory monitoring of derivative exposures, and align India’s reporting infrastructure for OTC derivatives with international data standards and global regulatory practices.

6. RBI introduces Draft Amendment Directions for ‘Review of Framework of Limiting Customer Liability in Digital Transactions’²³

The Reserve Bank of India has issued draft amendment directions proposing revisions to the existing framework on customer liability in unauthorised electronic banking transactions.

This has been facilitated by amending the existing directions on responsible business conduct applicable to various regulated entities as on date. The proposed changes seek to expand the scope of the framework to cover a broader range of digital payment frauds, streamline timelines for reporting and resolution of customer complaints, and strengthen safeguards for customers against unauthorised transactions.

Pertinently, as per the proposed amendments, in cases involving complaints of fraudulent electronic banking transactions, the burden of proving customer liability will lie with the bank. Further, banks will now be required to issue instant SMS alerts for all electronic banking transactions exceeding INR 500.

PUBLIC MARKETS

Viral Mehta (Mumbai-BKC)

Nishchal Joshipura (Mumbai-BKC)

1. Government amends Securities Contracts (Regulation) Rules to revise minimum public shareholding thresholds for listed companies.

The Ministry of Finance (Department of Economic Affairs) has notified the Securities Contracts (Regulation) Amendment Rules, 2026²⁴, amending Rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957 (“SCRR”). The amendments revise the framework governing minimum public shareholding (“MPS”) requirements for companies seeking to list securities on recognised stock exchanges, introducing a more calibrated structure linked to the post-issue capital of the issuer.

Companies with post-issue capital up to INR 1,600 crore must continue to maintain at least 25% public shareholding at listing. For larger issuers, the rules permit lower initial public offers subject to minimum value thresholds and phased timelines for achieving the 25% MPS requirement. For instance, companies with post-issue capital between INR 4,000 crore and INR 50,000 crore may list with a minimum public offer of 10%, while issuers with post-issue capital exceeding INR 50,000 crore are subject to value-based minimum public offer requirements coupled with extended timelines (ranging from five to ten years) to reach the 25% public shareholding threshold.

The amendments also clarify that timelines for achieving the prescribed public shareholding levels will be available to companies already listed prior to the commencement of the amendment rules. Further, companies issuing superior voting rights shares must list such shares on the same recognised stock exchange as the ordinary shares offered to the public. The revised framework introduces greater flexibility for large issuers accessing public markets while maintaining the long-standing policy objective of ensuring adequate public float over time.

2. SEBI introduces SWAGAT-FI framework to streamline access for trusted foreign investors.

The Securities and Exchange Board of India (“SEBI”) has issued a circular²⁵ introducing the Single Window Automatic and Generalised Access for Trusted Foreign Investors (“SWAGAT-FI”) framework for Foreign Portfolio Investors (“FPIs”) and Foreign Venture Capital Investors (“FVCIs”), pursuant to the SEBI (Foreign Portfolio Investors) (Second Amendment) Regulations, 2025²⁶. The framework aims to simplify onboarding, compliance, and operational processes for certain categories of regulated and low-risk foreign investors.

Few of the key provisions of the circular are as follows:

• Eligibility criteria for SWAGAT-FI registration: The framework is available to specified categories of trusted institutional investors, including government or government-related investors, appropriately regulated mutual funds or unit trusts with diversified retail investors operating as blind pools, regulated insurance companies investing proprietary funds without segregated portfolios, and appropriately regulated pension funds.

• Jurisdiction and regulatory oversight requirements: Eligible public retail funds must be established in identified jurisdictions and regulated by recognised statutory authorities in such jurisdictions. The list of identified jurisdictions and regulators will be specified in a Standard Operating Procedure to be framed by the Custodians and Designated Depository Participants Standards Setting Forum (CDSSF) in consultation with SEBI.

• Simplified compliance and extended registration validity: SWAGAT-FI FPIs will benefit from an extended registration renewal cycle of 10 years, compared to the standard three-year block for other FPIs. Additionally, certain reporting requirements are relaxed, including simplified renewal procedures and reduced disclosure obligations.

• Unified investment and custody framework: Depositories will facilitate a single unified investment and accounting structure enabling SWAGAT-FIs to hold securities acquired as FPIs, FVCIs, or as foreign investors investing in units of Indian investment vehicles within a consolidated framework.

• Relaxed KYC review requirements: For SWAGAT-FI FPIs, custodians will conduct Know Your Client (KYC) reviews once every 10 years, significantly reducing the compliance burden compared to the periodic reviews applicable to other FPIs.

The circular will come into effect from June 01, 2026, and depositories, custodians, and designated depository participants have been directed to make necessary system-level changes to implement the framework. The SWAGAT-FI regime is intended to enhance ease of doing business for trusted foreign institutional investors while strengthening India’s position as a competitive destination for global capital.

INSURANCE

Nishchal Joshipura (Mumbai-BKC)

Parul Jain (Delhi)

1. Insurance Regulatory and Development Authority of India (“IRDAI”) issues revised guidelines on establishment and closure of liaison offices by overseas insurers.

IRDAI has issued revised Guidelines on Establishment and Closure of Liaison Office in India by an Insurance Company registered outside India²⁷, superseding the earlier guidelines dated October 17, 2022²⁸. The revised framework sets out the eligibility criteria, approval process, permitted activities, compliance obligations, and closure procedures applicable to liaison offices (“LOs”) established in India by overseas insurers. The guidelines aim to streamline the regulatory framework governing such offices while ensuring that their activities remain limited to representational and communication functions.

Few of the key provisions of the guidelines are as follows:

• Eligibility criteria for establishing a liaison office: Overseas insurers seeking to establish an LO in India must have a financially sound track record for the immediately preceding three financial years in their home jurisdiction and a minimum net worth²⁹ of USD 65 million. IRDAI may relax this requirement in exceptional cases, including for foreign state-owned insurers or reinsurers with strong credit ratings or strategic relevance for market development.

• Approval process and validity period: Applications must be submitted to IRDAI in Form IRDAI-FIC-1 along with prescribed documentation and a non-refundable processing fee of USD 6,000. The initial approval to operate an LO is granted for three years, extendable for an additional three-year period subject to compliance with the guidelines.

• Permitted activities of liaison offices: LOs may undertake only non-commercial activities, including representing the overseas insurer in India, conducting market research in the insurance sector, and acting as a communication channel between the overseas insurer and entities in India.

• Operational restrictions and compliance obligations: LOs are prohibited from undertaking any commercial, trading, or soliciting activities in India. All operating expenses must be funded exclusively through foreign remittances from the overseas insurer, and the LO cannot borrow, lend, accept deposits, or acquire immovable property in India. LOs must also comply with applicable provisions under FEMA, the Companies Act, 2013, and other applicable Indian laws.

• Reporting and certification requirements: LOs must maintain proper books of accounts and submit annual financial statements and an Annual Activity Certificate certified by an independent chartered accountant confirming that the LO has undertaken only permitted activities and that its expenses have been funded through foreign remittances.

These revised guidelines are intended to provide greater regulatory clarity on the establishment and operation of liaison offices by overseas insurers while ensuring that such offices remain limited to representational and market-development activities in India.

2. IRDAI issues clarifications on insurer investments in Alternative Investment Funds (“AIFs”).

IRDAI has issued clarifications to the Master Circular on Actuarial, Finance and Investment Functions of Insurers dated May 17, 2024³⁰, addressing insurer investments in AIFs and the operationalisation of “excusal rights” for overseas investments. The clarifications respond to industry requests seeking guidance on compliance with Section 27E of the Insurance Act, 1938³¹, which restricts insurers from investing policyholder funds outside India. The circular also revises certain exposure norms applicable to investments in AIFs through Fund of Funds (“FoF”) structures.

Few of the key clarifications are as follows:

• Recognition of excusal rights for overseas investments: Insurers may invest in AIFs that have overseas exposure provided that the insurer’s investment is subject to “excusal rights” in accordance with the SEBI Circular dated April 10, 2023. Under this mechanism, proceeds of the insurer’s capital commitments must not be utilised for investments outside India.

• Mandatory documentation safeguards: Insurers must submit a formal declaration citing Section 27E of the Insurance Act, 1938 as the basis for their inability to participate in overseas investments. Additionally, the Private Placement Memorandum (“PPM”) of the AIF must include a clause ensuring that capital contributed by insurers is not drawn down or deployed for investments outside India.

• Audit and compliance certification requirements: Statutory auditors of the AIF must certify that insurer capital has not been invested overseas. Insurers must also obtain periodic compliance certificates from the AIF confirming that excusal rights were validly invoked and that no costs relating to overseas assets were charged to the insurer. Concurrent auditors of the insurer must independently verify compliance with these requirements.

• Revised exposure limits for AIF investments: IRDAI has clarified that insurers must comply with the single AIF exposure limits prescribed under the Master Circular by considering both direct investments and indirect exposure through FoF structures when calculating exposure to a specific AIF.

These clarifications aim to expand investment avenues for insurers while ensuring strict compliance with statutory restrictions under the Insurance Act, 1938, particularly with respect to overseas investments of policyholder funds.

CONCLUSION

The developments during the first quarter of 2026 reflect India’s continued efforts to strengthen its financial regulatory architecture while facilitating cross-border investment and capital market participation. Policy measures such as the recalibration of the Press Note 3 framework, the sharp reduction of U.S. tariffs on imports from India, and reforms to the RBI’s Voluntary Retention Route demonstrate a broader policy focus on improving investment certainty and enhancing market access for global investors. At the same time, regulatory initiatives including the new FEMA regulations governing export and import transactions and the introduction of the UTI framework for OTC derivatives reporting underscore an increased emphasis on transparency, regulatory clarity, and alignment with international financial standards.

Taken together, these developments reinforce India’s ongoing policy objective of fostering a stable, predictable, and globally integrated financial ecosystem.

Smita Singh, Parina Muchhala, Kamini Toprani and Nishchal Joshipura
You can direct your queries or comments to the authors.

¹“India’s Goldilocks Moment: High Growth, Low Inflation,” Press Information Bureau, Government of India, Ministry of Information & Broadcasting, dated December 29, 2025, available at: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2209412&reg=3&lang=2

²“The Outlook for India’s Economy in 2026 amid a New US Trade Deal,” Goldman Sachs Research, February 9, 2026, available at: https://www.goldmansachs.com/insights/articles/the-outlook-for-indias-economy-in-2026-amid-new-us-tradedeal

³“RBI Inflation Forecast for 2026-27: Insights on Price Stability and Growth Strategy,” The Economic Times, dated February 6, 2026, available at: https://economictimes.indiatimes.com/news/economy/indicators/rbi-inflation-forecast-for-2026-27-insights-on-price-stability-and-growth-strategy/articleshow/127968992.cms

⁴“How the Strait of Hormuz closure affects global oil supply,” Reuters, by Clare Farley et al., published March 11, 2026, available at: https://www.reuters.com/graphics/IRAN-CRISIS/OIL-LNG/mopaokxlypa/

⁵“Oil shock looms: Middle East tensions put Indian markets on edge,” Mint, by Harsha Jethmalani, dated March 2, 2026, available at: https://www.livemint.com/market/mark-to-market/oil-shock-looms-middle-east-tensions-put-indian-markets-on-edge-iran-strait-of-hormuz-11772363650524.html

⁶“Iran Conflict Raises Oil, Rupee, and Trade Risks for India’s Economy,” India Briefing, by Melissa Cyrill, dated March 3, 2026, available at: https://www.india-briefing.com/news/iran-conflict-impact-india-oil-rupee-trade-inflation-43160.html

⁷“Indian shares fall after Trump dashes hopes of Iran war de-escalation,” Reuters, by Bharath Rajeswaran, dated April 2, 2026, available at: https://www.reuters.com/world/india/indian-shares-set-open-lower-after-trump-ramps-up-iran-threat-2026-04-02/

⁸“India Exim Bank issues 10-year US$1 billion Senior Unsecured Bonds in the 144A/Reg-S format,” Export-Import Bank of India Press Release, available at: https://www.eximbankindia.in/node/241

⁹“Matrix Info Systems Pvt. Ltd. v. Intel Corporation,” Case No. 05 of 2019, Competition Commission of India, Order dated February 12, 2026, available at: https://www.cci.gov.in/antitrust/orders/details/1223/0

¹⁰“After HDFC Chairman Quits, RBI Says "No Concerns Around Bank Functioning", NDTV, dated March 19, 2026, available at: https://www.ndtv.com/india-news/hdfc-bank-chairman-atanu-chakraborty-resignation-no-material-concerns-around-banks-functioning-says-rbi-11236771.

¹¹The Authority for Advanced Rulings (“AAR”) (Income Tax and Others vs. Tiger Global International II Holdings [TS-38-SC-2026].

¹²“Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Mauritius,” Government of India Notification No. GSR 920(E), dated December 26, 1983 (as amended), available at: https://www.incometaxindia.gov.in/w/mauritius-comprehensive-agreements-1                                                                                

¹³“Circular No. 7 of 2017 — Provisions of Chapter X-A of the Income Tax Act, 1961 (General Anti-Avoidance Rule),” Income Tax Gazetted Officers’ Association — West Bengal Unit (ITGOAWBU), available at: https://itgoawbunit.org/pdf/229777923Cir%2007.pdf

¹⁴“Income-tax (Tenth Amendment) Rules, 2026,” CBDT Notification No. 54/2026, Ministry of Finance (Department of Revenue), Government of India, G.S.R. 240(E), dated March 31, 2026, available at: https://www.incometaxindia.gov.in/documents/d/guest/notification-no-54-2026-pdf

¹⁵“Income-tax (Amendment) Rules, 2026,” CBDT Notification No. 55/2026, Ministry of Finance (Department of Revenue), Government of India, G.S.R. 241(E), dated March 31, 2026, available at: https://www.incometaxindia.gov.in/documents/d/guest/notification-no-55-2026-1-pdf

¹⁶“Cabinet approves changes in guidelines on investments from countries sharing land border with India,” Press Information Bureau, Government of India, dated March 10, 2026 (Posted On: March 10, 2026, PIB Delhi), available at: https://www.pib.gov.in/PressReleseDetail.aspx?PRID=2237806&reg=1&lang=1

¹⁷Press Note No. 2 (2026 Series), Review of FDI Policy on Investments from Countries Sharing Land Border with India, Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, Government of India, F. No. 5(5)/2020-FDI Policy (Pt 1), dated March 15, 2026, available at: https://www.dpiit.gov.in/static/uploads/2026/03/b9da5830b052c2f2d788593e97d07c63.pdf

¹⁸“Voluntary Retention Route – Imparting predictability and increasing ease of doing business,” Reserve Bank of India Circular (A.P. (DIR Series) Circular No. 21), Reserve Bank of India, RBI/2025-26/205, dated 6 February 2026, available at: https://rbi.org.in/Scripts/NotificationUser.aspx?Id=13289&Mode=0

¹⁹“Master Direction – Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025,” Reserve Bank of India, RBI/2024-25/126, FMRD.FMD. No.10/14.01.006/2024-25, dated 7 January 2025 (updated as on 6 February 2026), available at: https://rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12765

²⁰“Reserve Bank of India, Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026”, Notification No. FEMA 23(R)/2026-RB, Jan. 13, 2026 (published in the Official Gazette of India on Jan. 15, 2026), available at: https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12630

²¹“Reserve Bank of India, Foreign Exchange Management (Export of Goods and Services) Regulations, 2015”, Notification No. FEMA 23(R)/2015-RB, Jan. 12, 2016 (as amended up to Nov. 14, 2025), available at: https://www.rbi.org.in/scripts/BS_FemaNotifications.aspx?Id=10256

²²“Unique Transaction Identifier for OTC Derivative Transactions,” Reserve Bank of India Circular, RBI/2025-26/222, CO.FMRD.MIOD.No.8/11.01.057/2025-26, dated February 18, 2026, available at: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13307&Mode=0

²³“RBI Issues Draft Amendment Directions for ‘Review of Framework of Limiting Customer Liability in Digital Transactions’,” Press Release (Press Release: 2025-2026/2224), Reserve Bank of India, dated March 6, 2026, available at: https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=62340

²⁴“Securities Contracts (Regulation) Amendment Rules, 2026,” Ministry of Finance (Department of Economic Affairs), Government of India, G.S.R. 184(E), dated March 13, 2026 (published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i)), available at: https://www.sebi.gov.in/legal/rules/mar-2026/securities-contracts-regulation-amendment-rules-2026_100349.html

²⁵“Single Window Automatic and Generalised Access for Trusted Foreign Investors (SWAGAT-FI) Framework for FPIs and FVCIs,” Securities and Exchange Board of India Circular, Circular No. HO/19/34/14(5)2025-AFD-POD2/I/2703/2026, dated January 16, 2026, available at: https://www.sebi.gov.in/legal/circulars/jan-2026/single-window-automatic-and-generalised-access-for-trusted-foreign-investors-swagat-fi-framework-for-fpis-and-fvcis_100081.html

²⁶“Securities and Exchange Board of India (Foreign Portfolio Investors) (Second Amendment) Regulations, 2025,” Securities and Exchange Board of India, dated December 3, 2025, available at: https://www.sebi.gov.in/legal/regulations/dec-2025/securities-and-exchange-board-of-india-foreign-portfolio-investors-second-amendment-regulations-2025_98144.html

²⁷“Guidelines on Establishment and Closure of Liaison Office in India by an Insurance Company registered outside India,” Insurance Regulatory and Development Authority of India (IRDAI), available at: https://irdai.gov.in/document-detail?documentId=8752913

²⁸“Guidelines on Establishment and Closure of Liaison Office in India by an Insurance Company registered outside India,” Insurance Regulatory and Development Authority of India (IRDAI), Ref: IRDAI/F&I/GDL/MISC/27/02/2026, dated February 11, 2026, available at:https://irdai.gov.in/documents/37343/366029/Guidelines+on+Establishment+and+Closure+of+Liaison+Office+in+India+by+an+Insurance+Company+registered+outside+India.pdf/7f1cf31a-df13-b088-d823-b1e9ecc6b301?version=1.0&t=1770873069430

²⁹As per the circular, “net worth” shall mean Total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or Chartered Accountant or any Registered Accounts Practitioner by whatever name called of the home country.

³⁰“Clarifications on Provisions with respect to Investment in Alternative Investment Funds (AIFs),” Insurance Regulatory and Development Authority of India Circular, Cir. No. IRDAI/F&I/CIR/INV/28/2/2026, dated February 12, 2026, available at: https://irdai.gov.in/documents/37343/365525/Clarifications+on+provisions+with+respect+to+investment+in+Alternative+Investment+Funds%28AIFs%29.pdf/f7d75129-66cd-99d4-2cc5-3bb4fe1f4ff4?version=1.0&t=1770898118038

³¹“The Insurance Act, 1938,” Act No. 4 of 1938, Government of India (as amended from time to time), available at: https://irdai.gov.in/documents/37343/366193/%E0%A4%AC%E0%A5%80%E0%A4%AE%E0%A4%BE+%E0%A4%85%E0%A4%A7%E0%A4%BF%E0%A4%A8%E0%A4%BF%E0%A4%AF%E0%A4%AE+1938+_+The+Insurance+Act+1938.doc/0f9c0e52-56be-b85b-56b2-ab6e0bc550e5