FEMA (Deposit) Sixth Amendment 2026: What the Expanded SNRR Framework Really Changes for Startups with Foreign Investment
On 24 June 2026 the RBI notified the Foreign Exchange Management (Deposit) (Sixth Amendment) Regulations, 2026, widening the scope of the Special Non-Resident Rupee (SNRR) account and bringing International Financial Services Centres (IFSCs) formally into the deposit framework. It is a genuinely useful change for any startup raising or settling money across the India–GIFT City boundary — but it is also a change that is easy to over-read.
So let me start with the clarification that matters most, because it is the one even experienced founders get wrong this week: the Sixth Amendment changes the conduit, not the characterisation. An SNRR account is now more flexible and can sit at an IFSC branch — but whether a particular inflow into your company is foreign equity, an external commercial borrowing, or a current-account receipt is decided by the substance of the transaction under the relevant regulations, not by which account it passes through. Routing a loan through a shiny new SNRR account does not turn it into a service payment.
And a second clarification, because two different 2026 amendments are being mixed together in practitioner chatter: the change that let an IFSC unit lend to an Indian company came earlier, through the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 (Notification FEMA 3(R)(5)/2026-RB dated 9 February 2026), which rebuilt the ECB regime. The June amendment is about the SNRR account — the rupee plumbing — not about who may lend. Keeping the two apart is the whole game.
What the Sixth Amendment actually does
This is the latest step in a staged liberalisation, and the stages matter. The Fifth Amendment (2025) had already widened SNRR accounts to cover both current and capital account transactions (dropping the old “bona fide business interest” list), removed the seven-year tenure cap, and let non-residents open SNRR accounts with overseas branches of AD banks. The Sixth Amendment builds on that base. It substitutes paragraph 1 of Schedule 4 of the Deposit Regulations so that a person resident outside India may open an SNRR account “with an authorised dealer in India or its branch outside India (including in an IFSC in India)”, to put through permissible current and capital account transactions with residents, and any bona fide transaction with other non-residents. Its distinctive additions are three:
- IFSC access.SNRR accounts can now be opened and operated through AD-bank branches in an IFSC (GIFT City), and the definition of “IFSC” is formally written into the Deposit Regulations, aligning them with the IFSCA Act, 2019.
- Inter-account transfers.Funds may move from NRO to SNRR, and from SNRR to NRE, within the limits of the Foreign Exchange Management (Remittance of Assets) Regulations, 2016.
- Several older Schedule 4 clauses have been deleted, and corresponding changes were made to the Master Direction on Deposits (check it for the exhaustive permissible-transaction list before you file).
A point of precision that trips up commentary: the current-and-capital breadth is not new to the Sixth Amendment — that was the Fifth Amendment’s doing. The Sixth restates it in the substituted Schedule 4 paragraph (which is why some write-ups read it as fresh), but its real novelty is the IFSC dimension and the transfer flexibility.
None of that changes the FDI rules, the ECB rules or the current-account rules. It changes where a rupee account can live and what it may route. Hold that thought through the three cases below.
Case 1 — A DPIIT startup taking CCPS money from a Singapore investor
A recognised startup issues compulsorily convertible preference shares (CCPS) to a Singapore fund.
What governs it. CCPS that are compulsorily convertible are a non-debt instrument under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 — i.e., this is foreign direct investment, not a loan. (The “compulsorily” matters: an optionally convertible instrument is treated as debt and falls under the ECB regime instead.) Startups are generally under the 100% automatic route; Press Note 3 land-border restrictions do not touch Singapore.
The CA’s steps. Confirm pricing is at or above fair value per internationally accepted methodology; file Form FC-GPR within 30 days of allotment through the FIRMS portal’s Single Master Form; complete the parallel company-law allotment (PAS-3) within its own timeline; and keep the FIRVC/valuation report and the investor’s KYC on file.
Where the Sixth Amendment fits. It is the conduit, not the trigger. The investor’s rupee leg can now be routed through an SNRR account held at an IFSC branch as a permissible capital account transaction — operationally smoother, especially for a fund already operating out of GIFT City. The reporting and pricing obligations are unchanged; FC-GPR is still due regardless of which account the money came through.
Case 2 — An MSME exporter financing receivables
A small exporter wants faster working capital against its invoices.
What governs it. Domestically, this is the TReDS route — and the TReDS Directions, 2026 (notified around 23 June 2026) have just simplified it: the mandatory due-diligence requirement for MSME sellers is removed, operator capital norms revised, and operators given more procedural flexibility — all aimed at faster receivables discounting. TReDS itself is a domestic receivables platform; it is not a cross-border or SNRR mechanism.
For export receivables, the cross-border analogue sits at the IFSC — the International Trade Financing Services (ITFS) platforms in GIFT City — and here the SNRR/IFSC integration is genuinely relevant: it supports rupee settlement legs of cross-border trade finance through an SNRR account at an IFSC branch. Export proceeds themselves remain governed by the Master Direction – Export of Goods and Services (realisation and repatriation timelines, EDPMS), which was correspondingly updated.
The CA’s steps. Keep the domestic (TReDS) and cross-border (ITFS/SNRR) tracks distinct in the books; ensure export-realisation timelines and EDPMS reporting are met; and do not assume the SNRR amendment changes anything about how domestic TReDS financing is treated — it does not.
Case 3 — A founder setting up an IFSC-branch entity for treasury
A founder wants a GIFT City (IFSC) unit to centralise group treasury, and to fund the Indian operating company from it.
What governs it. An IFSC unit is treated as a person resident outside India for the relevant FEMA purposes — which is why it can hold an SNRR account (now at an IFSC branch). For ECB lending, the revised framework’s recognised-lender list has three gateways: any person resident outside India; an overseas branch of an RBI-regulated lender; and a financial institution or its branch set up in an IFSC. So whether the founder’s IFSC entity can fund the Indian company as an ECB depends on it qualifying through one of those gateways — most cleanly by being set up as an IFSC financial institution rather than a bare treasury vehicle. Where it qualifies, a loan to the Indian company is, in substance, an external commercial borrowing — and because it is a related-party loan, it must be on an arm’s-length basis (the revised ECB framework has done away with the old “foreign equity holder” concept and instead requires arm’s-length terms for related-party ECBs).
The CA’s steps. Treat the funding as an ECB: confirm eligible-borrower status, take it under the automatic route if it meets the parameters (most do, now that pricing caps are gone and the minimum average maturity is broadly three years), obtain the Loan Registration Number by filing Form ECB through the AD Category-I bank, and report drawdowns/repayments via Form ECB-2 (now event/cash-flow-based, not monthly). Equity infusion instead of a loan would flip this back to Case 1 (FDI, FC-GPR).
The question no one on the platform has answered cleanly
If a startup receives money from its own IFSC branch for working capital, is it an ECB, a deposit, or a permissible current-account transaction — and whose approval is needed?
Here is the clean answer, and it turns entirely on substance:
- If it is a loan → it is an ECB.Governed by the Borrowing and Lending Regulations as amended in February 2026. Provided the IFSC lender qualifies as a recognised lender, this is permissible, but it must run through the ECB machinery — eligible borrower, arm’s-length pricing (related party), automatic route where parameters are met, Form ECB/LRN via the AD bank, ECB-2 reporting. End-use restrictions on ECBs have been substantially eased under the 2026 framework, but working-capital end-use still needs to be checked against the current conditions rather than assumed.
- If it is equity → it is FDI.Non-debt instrument under the NDI Rules; FC-GPR; pricing guidelines. Not an ECB at all.
- If it is genuine consideration for goods or services → it is a current-account transaction.Permissible without the borrowing apparatus — but only if it is actually a trade payment, with an underlying supply the AD bank can record, not a loan dressed as one.
- “Deposit” is largely a red herring here.Under FEMA, the Deposit Regulations govern non-residents’ rupee/forex accounts in India (NRE/NRO/FCNR/SNRR); an operating company receiving money is not “accepting a deposit” in that sense. (The deposit concept that does bite an Indian company is the Companies Act one — a separate regime entirely.)
What the Sixth Amendment adds to all of this is the account: the IFSC unit, as a non-resident, can hold an SNRR account at an IFSC branch and route the rupee leg of whichever of the above transactions it is. The amendment did not convert an inter-company loan into a current-account transaction, and a practitioner who treats it that way is inviting a contravention. The approval question therefore answers itself: it is the AD Category-I bank route (automatic) for a conforming ECB, with RBI approval only where the ECB falls outside automatic-route parameters; FC-GPR reporting (no prior approval) for FDI; and ordinary AD-bank processing for a genuine current-account payment.
Permissible SNRR credits and debits, after the amendment
At a working level, the amended SNRR account routes:
Credits — proceeds of permissible current and capital account transactions with residents; inward remittances through banking channels; and transfers from other repatriable rupee accounts (now expressly including NRO→SNRR), plus accrued interest.
Debits — payments for permissible current and capital account transactions with residents; remittances outside India; and transfers to NRE accounts, within the Remittance of Assets limits.
Treat this as the shape, not the statute: the exhaustive, current permissible-transaction list lives in the Master Direction on Deposits as updated alongside the Sixth Amendment, and the AD bank must record the underlying purpose of each transaction. For any non-routine flow, confirm the specific permission before moving money.
Frequently asked questions
1. What did the FEMA (Deposit) Sixth Amendment 2026 change? It widened the SNRR account so it can be opened at an AD-bank branch in an IFSC, for permissible current and capital account transactions; inserted the IFSC definition into the Deposit Regulations; permitted NRO→SNRR and SNRR→NRE transfers within Remittance-of-Assets limits; and deleted several older Schedule 4 clauses.
2. Does it let an IFSC unit lend to my Indian startup? That permission came from the February2026 ECB amendment, which made IFSC financial institutions/branches recognised lenders. The June SNRR amendment provides the account through which the rupee leg can flow; it does not itself create the lending right.
3. Is money from our IFSC branch for working capital an ECB or a current-account transaction? If it is a loan, it is an ECB (arm’s-length, via Form ECB/LRN and the AD bank). It is a current-account transaction only if it is genuine consideration for goods or services. The SNRR account it is routed through does not change that.
4. Our Singapore investor is putting in CCPS money — does the amendment change our filing? No. Compulsorily convertible CCPS is FDI under the NDI Rules; FC-GPR within 30 days still applies. The amendment only makes the rupee conduit (an IFSC-branch SNRR account) more convenient.
5. Does the TReDS update relate to the SNRR amendment? No. The TReDS Directions, 2026 simplify domestic MSME receivables financing. Cross-border export receivables run through IFSC platforms, where the SNRR/IFSC integration helps with rupee settlement — but TReDS itself is separate.
Which approval do we need? A conforming ECB is automatic route (AD bank, no prior RBI approval); a non-conforming ECB needs RBI approval; FDI needs no prior approval but FC-GPR reporting; a genuine current-account payment needs only ordinary AD-bank processing.
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This article is general information as on 25 June 2026 and is not advice on any specific transaction. FEMA regulations, the Master Direction on Deposits and the ECB framework are changing rapidly in 2026; verify the current text on rbi.org.in and consult your AD bank before structuring any cross-border flow.
The author, CA Sundram Gupta, is the founder of Patron Accounting LLP, a CA & CS firm headquartered in Pune with offices in Mumbai, Delhi and Gurugram, advising startups and MSMEs on FEMA compliance, FDI/ECB structuring and GIFT-IFSC transactions.
