Consumer Protection Act,2019

Pecuniary Limits

District Commission State Commission National Commission

Does not exceed Rs 50 lakh to 2 crore Exceed 2 crore

50,00,000
Oversea Direct Investment
 REGULATORY FRAMEWORK

Foreign Exchange Management ( Overseas Investment) Rules,2022

Foreign Exchange Management ( Overseas Investment) Regulation,2022

Foreign Exchange Management ( Overseas Investment) Directions,2022

 Regulation Superseding on Notification

Foreign Exchange Management ( Overseas Investment) Regulation,2022

Foreign Exchange Management Foreign Exchange Management

(Transfer or Issue of any Foreign (Acquisition and Transfer of
Security) Regulation,2004 Immovable Property Outside
India) Regulation,2015
 Overseas Direct Investment

Unlisted Company Listed Company

Acquisition of equity Equity Share Capital Investment with

shares or subscription of control
part of Memorandum of Investment of 10% or
Association more Investment can be
less than 10%
 Overseas Investment

Overseas Investment” means financial commitment and Overseas

Portfolio Investment by a person resident in India.
 FINANCIAL COMMITMENT

OVERSEA DIRECT DEBT NON FUND

INVESTMENT BASED FACILITIES

Extended to all
foreign entities
 Overseas Portfolio Investment

Overseas Portfolio Investment”(OPI) means investment, other than ODI,

in foreign securities, but not in any unlisted debt instruments or any
security issued by a person resident in India who is not in an IFSC

A person resident in India in the equity capital of a listed entity, even

after its delisting shall continue to be treated as OPI until any further
investment is made in the entity
 Debt Instrument

(i) Government bonds

(ii) Corporate bonds

(iii) All tranches of Securitisation structure which are not equity tranche

(iv) Borrowings by firms through loans and

(v) Depository receipts whose underlying securities are debt securities

 MEANING OF INDIAN PARTY

INDIAN PARTY

Company Body incorporated Partnership Limited Liability Any other Notified by

Partnership CG

Special Act of Indian Partnership Act

Parliament 1932 Limited Liability
Partnership Act 2008
 PROCEDURE FOR MAKING OVERSEAS INVESTMENT

1) Submit Form
The person intending to make any financial commitment shall fill up the Form
FC with required documents and approach the designated Authorized Dealer Bank

2) Approval Route
Applicant shall approach their designated AD bank who shall forward the proposal to the
Reserve Bank after due scrutiny and with its specific recommendations

3) Transaction Number
The transaction number generated by the application shall be mentioned in their
reference and submit the relevant sections of the Form FC in the online OID application
 PROCEDURE FOR MAKING OVERSEAS INVESTMENT
4) Numbered and Indexed
The proposal shall be submitted to the Reserve Bank of India along with Other relevant
documents properly numbered, indexed and flagged.

5) Documents and details along with Application

Background and brief details of the transaction.
➢ Reason(s) for seeking approval mentioning the extant FEMA provisions.
➢ Observations of the designated AD bank with respect to the following:
• Prima facie viability of the foreign entity;
• Benefits which may accrue to India through such investment;
• Financial position and business track record of the Indian entity and the foreign entity;
• Any other material observation
➢ Recommendations of the designated AD bank
➢ Diagrammatic representation of the organisational structure indicating all the
subsidiaries of the Indian entity horizontally and vertically
 APPROVAL FROM THE CENTRAL GOVERNMENT

Oversea Investment/ Financial Commitment

• Pakistan
• Other Jurisdiction as may be advised by Central Government
• Strategic Sectors/ Specific Geographies

Application shall be forwarded by AD Banks to the Reserve Bank as

per laid down procedure for onwards submission to the Central
Government
 APPROVAL FROM THE CENTRAL GOVERNMENT

Strategic Sector
Energy
Natural Resources sectors such Oil, Gas,
Mineral Ores.
Submarine cable system and
Start -up
 APPROVAL FROM THE RESERVE BANK

Financial commitment by an Indian entity, exceeding USD 1

(one) billion (or its equivalent) in a financial year shall require
prior approval of the Reserve Bank even when the total financial
commitment of the Indian entity is within the eligible limit under
the automatic route.
NOC FROM LENDER BANK/REGULATORY BODY/INVESTIGATIVE AGENCY

1) Any person Resident in India

• Account Appearing as NPA

• Willful defaulter
• Under investigation of by Financial Sector regulator/investigate
agency

2) Shall Obtain NOC from lender bank/regulatory agency/investigative

agency
 MODE OF PAYMENT

By Remittance made through Banking Channel

Funds held in the account maintained in

accordance of FEMA

By Swap of securities

Proceeds of ADR/GDR/ECB
 MODE OF PAYMENT

Investment by way of cash is not permitted

No remittance shall be made by any Indian entity to its branch/office

outside India for making any overseas investment.

Any investment/financial commitment in Nepal and Bhutan shall be

done in a manner as provided in the Foreign Exchange Management
(Manner of Receipt and Payment) Regulations, 2016.

All dues receivable on investments (or financial commitment) made in

freely convertible currencies
OPENING OF FOREIGN CURRENCY ACCOUNT ABROAD BY AN INDIAN PARTY

An Indian entity may open, hold and maintain Foreign Currency Account
(FCA) abroad for the purpose of making ODI

In accordance with the provisions contained in Foreign Exchange

Management (Foreign Currency Accounts by a resident in India)
Regulations, 2015.
 OBLIGATION OF PERSON RESIDENT IN INDIA

1) Submit Evidence
Submit the evidence of investment to the AD bank within Six months, failing which the
funds remitted overseas shall be repatriated within the said period of six months.

2) Retention of Evidence
The evidence of investment shall be retained by the designated AD bank.

3) Form FC
Form FC shall be submitted along with requisite documents to AD bank for
obtaining UIN on or before making initial ODI

4) Allotment of UIN
The AD bank after due verification shall report the details in the OID application
for allotment of UIN.
 OBLIGATION OF PERSON RESIDENT IN INDIA

5) Remittance subject to UIN

Any remittance towards a foreign entity shall be facilitated by the AD bank only
after obtaining the necessary UIN for such entity

6) Allotment does not constitute approval

The allotment of UIN does not constitute an approval from the Reserve Bank for
the investment made/to be made in the foreign entity

7) Only record
The issue of UIN only signifies taking on record of the investment for
maintaining the database
 DELAY IN REPORTING

1) Person resident in India has made a delay in filing/submitting

the requisite form/return/document

2) Such person may file/submit the requisite form/return/

document, etc. and pay the Late Submission Fee (LSF) through
the designated AD bank in accordance with OI Regulations.
 RESTRICTION ON FURTHER FINANCIAL COMMITMENT OR TRANSFER

1) Shall not make any further financial commitment, whether fund-based or non-
fund-based, directly or indirectly, towards such foreign entity or transfer such
investment till any delay in reporting is regularized.

2) AD bank shall not facilitate any outward remittance/further financial

commitment by a person resident in India towards a foreign entity until any delay
in reporting is regularised
 RESTRICTION AND PROHIBITION

No Person Resident in India shall make ODI in

Real Estate activities

Gambling in any form

Dealing in financial
product linked to the
Indian Rupee
 RESTRICTION AND PROHIBITION

Restriction shall not apply to the following classes of companies

• Banking company
• Non-banking financial company
• Insurance company
• Government company
 ODI IN FINANCIAL SERVICES ACTIVITY
Criteria
• Net Profit during the preceding three financial years
• Registered and regulated by a financial services regulator
• Obtained approval from regulators both in India and the host
country

Entity not engaged in financial services activity

An Indian entity not engaged on financial services activity
subject to condition that such Indian entity has posted net profit
during the preceding three financial years

Bank and NBFC

Bank and NBFC regulated by RBI shall be subject to conditions
laid down by RBI
 MANNER OF MAKING ODI

1) Subscription of MOA
2) Bidding or Tender Procedure
3) Right Issue
4) Bonus Shares
5) Swap of Securities
6) Capitalisation
7) Merger, demerger amalgamation
 ODI IN FINANCIAL SERVICES ACTIVITY

LIMIT FOR FINANCIAL COMMITMENT

The total financial commitment made by an Indian entity in all the foreign
entities taken together at the time of undertaking such commitment shall not
exceed 400 percent of its net worth as on the date of the last audited balance
sheet or as directed by the Reserve Bank, in consultation with Central
Government from time to time

Due not include

Capitalisation of retained earnings

Exception
Maharatna or Navratna or Miniratna or subsidiaries of such public sector
undertakings in foreign entities outside India engaged in strategic sectors
 ODI BY REGISTERED TRUST OR SOCIETY
Prior Approval of the Reserve Bank

Following are terms and condition

• Foreign Entity is engaged in the same sector

• Existence for atleast three financial years
• Trust Deed (Trust),Memorandum (Section 8),Rules of By laws
(Society) shall permit the proposed ODI
• Approval of trustee, governing body or council for investment
• In case it require special license or permission either from Ministry
of Homes affairs, then special license or permission has been
obtained and submitted to AD Bank
 ODI IN IFSC BY PRI

1) Application
a) Approval of financial service regulator,shall be decided within 45 days from
date of application
b) Failing which it shall be deemed to be approval
2)Entity not engages in financial service
Need to meet net profit condition
Except- Banking or Insurance
3)Investment fund or Vehicle
A person resident in India may make contribution to an investment fund or
vehicle set up in an IFSC as OPI
 REPORTING

1) Prescribed Manner and in format

All reporting with respect to overseas investment by a person resident in India shall be
made through the designated AD bank in the prescribed manner and in the format
provided by the Reserve Bank

2) A person resident in India who has made ODI or making financial commitment or
undertaking disinvestment in a foreign entity shall report the following, namely:
(a) financial commitment, whether it is reckoned towards the financial commitment limit
or not, at the time of sending outward remittance or making a financial commitment,
whichever is earlier;
(b) disinvestment within thirty days of receipt of disinvestment proceeds;
(c) restructuring within thirty days from the date of such restructuring
 REPORTING

1) Annual Performance Report

The Annual Performance Report (APR) shall be certified by a chartered
accountant where the statutory audit is not applicable, including in case of
resident individuals.

2) Conversion of IDR’s
Any acquisition of foreign securities through conversion of Indian Depository
Receipts (IDRs) shall be duly reported as ODI or OPI, as applicable.

3)Oversea Portfolio Investment

Within 60 days from end of half year
 PERMISSIBLE SOURCES OF OVERSEAS DIRECT INVESTMENT

Drawal of Foreign Exchange Capitalization of Exports Issue of ADR/ GDR

from AD Bank and other dues

Swap of Shares Proceeds of ECB/ Balance held in

FCCB EEFC A/c with AD
ROUTES OF OVERSEA DIRECT INVESTMENT

Automatic Route Approval Route

 INDIAN CO MAKING INVESTMENT IN JV/WOS ABROAD IN FINANCIAL SERVICE SECTOR

Profit Registration with Authority Approval Prudential Norms

Earned net profit Registered with Obtain approval both Capital adequacy as
during the appropriate authority in India and outside prescribed has been
preceding 3 for conducting India fulfilled
financial years financial activities
 OVERSEA INVESTMENT BY SOLE PROPRIETORSHIP/UNREGISTERED PARTNERSHIP

Approval Route

Status Holder Proven Track Record Authorised Dealer Government

Exporter agency

• Export outstanding does Know Your Customer

Classified as Status not exceed 10% of compliant It has not come under the
Holder Exporter preceding 3 years adverse notice of government
under Foreign Trade agency like CBI, Income Tax
Policy • Consistently high export and does not appear in the
performance exporters caution list of RBI

Investment Threshold Limit

10% of average of three 200% of Net worth

years export realisation
 OVERSEA INVESTMENT BY REGISTERED TRUST
Approval Route

Registration Trustees KYC

Indian Trust Approved by AD bank is satisfied that KYC is

Act,1882 trustees completed and in Bonafide activity

Trust Deed Existence Adverse Notice

Permits the proposed Atleast for period It has not come under the
Investment of 3 years adverse notice of government
agency like CBI, Income Tax.
 MEANING OF OVERSEA DIRECT INVESTMENT

Means Does not include

Investment
Portfolio Investment

Contribution to Subscription to
capital Memorandum of Capital

Of a foreign entity

Signifying long term interest

Joint Venture (JV) Wholly owned

subsidiary (WOS)
 MEANING OF FINANCIAL COMMITMENT

Financial
Commitment

100% Equity 100% Loan 100% Bank 100% Guarantee

Shares Guarantee issued by Indian Party

100% Compulsory 50% Performance

Convertible Preference Guarantee
Shares
 OVERSEA INVESTMENT BY REGISTERED SOCIETY
Approval Route

Registration Existence
Adverse Notice

Society Registration Atleast for period It has not come under the
Act,1860 of 3 years adverse notice of government
agency like CBI, Income Tax.

MOA and rules and KYC

regulations

AD bank is satisfied that KYC is

Permits the proposed completed and in Bonafide activity
Investment
 ACQUISITION / SALE OF FOREIGN SECURITIES BY RESIDENT INDIVIDUAL IN INDIA

Gift from PROI ESOPS Inheritance Remittance out of Bonus/ Right

RFC A/c Shares
 MEANING OF JOINT VENTURE OR WHOLLY OWNED SUBSIDIARY

Joint Venture Wholly Owned Subsidiary

• Means Foreign Entity • Means a foreign entity

• Registered / Incorporated in accordance with the • Registered / Incorporated in accordance with the
laws and regulations of host country laws and regulations of host country
• In which Indian party makes direct investment • Whose entire capital is held by Indian party
 INDIAN MUTUAL FUND FOR INVESTMENT ABROAD

Overall Cap= USD 7 Billion

ADR’s/ GDR’s of Indian and Foreign Company

Equity of overseas companies

Foreign Debt securities

Money Market Securities

Government Securities

Derivates

Short Term Deposits

Units by overseas Mutual Funds

 OBLIGATION OF INDIAN PARTY MAKING DIRECT INVESTMENT OUTSIDE INDIA

Share Certificate Repatriate Report

Receive Share certificate Repatriate to India all dues Annual Performance Report
and submit to AD bank like dividend,royalty, in Part II of Form ODI need
within 6 months technical fees etc to be submitted
INVESTMENT=ODI
JV/WOS