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RBI, vide circular dated May 21, 2024, has decided to regularize the issuances of partly paid units by AIFs to foreign residents prior to the FEM (Non-debt Instruments) (Second Amendment) Rules, 2024. This regularization is proposed to be done through the compounding process under the Foreign Exchange Management Act, 1999. Before approaching the RBI for compounding, AD Category-I banks are required to ensure that AIFs have completed the necessary administrative actions. These actions include reporting such issuances to the RBI via the Foreign Investment Reporting and Management System Portal and issuing conditional acknowledgements for the reports.
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