The Reserve Bank of India (RBI) has set up an helpline for startups to offer guidance and assistance for undertaking cross-border transactions within the ambit of the regulatory framework. "While seeking guidance, the enterprises should provide complete information to the Reserve Bank and mention the specific issues on which they need guidance from the Reserve Bank in relation to the Foreign Exchange Management regulations. This would enable the personnel attending the helpline to offer timely and effective information," the RBI said in a notification. RBI said that startups do a lot of cross border transactions especially when it comes to matters related to investment. Note that while the RBI calls it a helpline, it is an email only service. Companies can send their queries to helpstartup@rbi.org.in. In India, all cross-border transactions are regulated by the Foreign Exchange Management Act, 1999. It is interesting to note that the helpline for startups comes in after the RBI effectively removed foreign direct investments (FDI) restrictions for Alternative Investment Funds (AIF). Thereby downstream investments by AIFs in restricted sectors such as ecommerce can bypass FDI laws. The RBI said that any AIFs which are sponsored or managed by an Indian resident can now be considered a domestic investment vehicle, regardless of what percentage of the AIF’s money comes from overseas funds. Venture capital firms are considered as AIFs and are regulated by the Securities Exchange Board of India (SEBI). So far, venture capital firms could not invest directly in ecommerce companies as they would violate the FDI…
