It came as a surprise to me too - I was sitting with a lawyer friend yesterday and he told me "You guys must be relieved."

I wasn't sure what he meant - and he referred to the new RBI regulations passed on November 16, 2015. (Here they are, if you like: scroll down to Schedule 11, Point 4 if you will https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10130&Mode=0)

Let me translate that for you. All of us Venture Capitalists in India operate under a regime called "Alternative Investment Funds" or AIF, regulated by SEBI.

Now you all must have heard the big issues over Foreign Direct Investment or FDI in retail and e-tail. Most of us VCs have Indian managers who determine where the money - which has mostly come in from overseas - goes. And till now, the interpretation has been that when we put this money in a company, it is overseas money that goes in. Hence we could not directly fund a retail or an e-tail business - because that would come afoul of FDI regulations.

So we've been advised to do something that is, let's say, stretching the law: we fund the back-end warehousing company (this is completely legal) and this back-end firm has a seeming arms-length relationship with a front-end company that actually builds the retail brand. (One example is WS Retail, the actual back-end funded warehousing entity behind an unfunded Flipkart.)

And we've had to step gingerly in other areas too - we couldn't enter insurance, or defence or other protected sectors at will.

Now to the RBI notification.

If you read it, it does one simple thing - in one magnificent stroke, it says that any Alternative Investment Fund, as long as it is sponsored or managed by an Indian resident, is to be considered as a domestic vehicle. Regardless of what percentage of its corpus is from overseas funds.

This means that, hey, ANYTHING we invest in, now is a domestic investment.

And as a domestic investor, we can back e-com companies, insurance companies, retail, defence firms, whatever.

Wow. This means the end of FDI restrictions as we now it.

Let's say I'm Walmart. Till now I couldn't invest in an Indian retail company. FDI restrictions, you see. But here's what I decide to do.

I set up an AIF, under SEBI. Let's call this the Martwal Fund. I find an Indian manager for this AIF. I put, say a billion dollars into it from Walmart's balance sheet. My Indian manager puts his fair share, say a hundred dollars. The Indian manager affirms that he acts independently.

And, voila, Martwal is now a domestic entity. Which can invest in any sector under the sun. So Martwal then backs a company building a chain of supermarkets in India. Sounds like a good idea?

What's happening here?

I guess the government is trying to find a balance between international investors saying "open up India" and its traditional voter base saying "don't let FDI come in".

This is a neat way. When money does come in, the government can always have deniability and say, that's not FDI - that's a domestic investment vehicle. That's allowed.

So both parties are happy.

Me? I'm on the whole happy. Let the money come in.

This opens a floodgate of opportunities.

And hey, if you're looking for an Indian manager for your money, you know where to look :-)

Mahesh Murthy is an entrepreneur an venture capitalist. He manages Seedfund, India's best-performing early-stage VC fund. He can be reached at mahesh<at> seedfund<dot>in or followed on Twitter at @maheshmurthy