Govt introduces foreign currency banking norms for startups

India’s amended Foreign Exchange Management Regulations 2024 now allow DPIIT-recognized startups to open foreign currency bank accounts, aligning with the updated startup definition.

India has introduced the amended Foreign Exchange Management Regulations 2024 to facilitate the opening of foreign currency bank accounts for DPIIT-recognized startups. This move aims to simplify processes for authorized dealers. The amendments align with recent changes in the startup definition, which now includes entities up to 10 years from their incorporation date—an increase from the earlier five years—and raises the turnover threshold to ₹100 crore from ₹25 crore. These changes reflect the government’s focus on fostering a more conducive environment for startups.

Currently, there are approximately 1.5 lakh startups registered with the Department for Promotion of Industry and Internal Trade (DPIIT).

According to Mayank Arora, Regulatory Director at Nangia Andersen India, “The recent amendment to FEM (Foreign Currency Accounts by a Person Resident in India) Regulations is in line with the effort to harmonise the definition of startup as per the latest notification issued by DPIIT.” This adjustment is part of the broader effort to standardize the definition of startups across regulations to support ease of doing business.

The Reserve Bank of India (RBI), through the Foreign Exchange Management (Deposit) (Fourth Amendment) Regulations, 2024, has also included a provision enabling authorized dealers to allow non-resident individuals to open and maintain interest-bearing accounts in Indian Rupees or foreign currencies. This addition complements the measures announced in the Budget 2024-25 to harmonize the startup definition.

Arora further noted that this regulatory change would eliminate any ambiguity faced by authorized dealer banks in facilitating the opening of foreign currency bank accounts for DPIIT-recognized startups, thereby streamlining operations and enhancing financial flexibility for these entities.