As per FEMA (Overseas Investment) Rules, 2022

Overseas Direct Investment (ODI) allows Indian entities and individuals to invest in foreign entities, subject to compliance with the Foreign Exchange Management Act (FEMA), RBI regulations, and sector-specific guidelines.

ODI is permitted through two routes:

• Automatic Route (no prior RBI approval required)
• Approval Route (requires prior approval from RBI/Government)

✅ ODI Under the Automatic Route

1. Determine Eligibility

• Check if the Indian entity (company/LLP) or individual is eligible under the FEMA (Overseas Investment) Rules, 2022.
• ODI in financial services requires the Indian entity to be registered and regulated by the financial regulator in India.

2. Check Sectoral Restrictions

• The foreign entity must engage in bonafide business activities.
• ODI is prohibited in:
  • Real estate business
  • Gambling or betting
  • Dealing in Indian rupee-linked financial products

3. Assess Financial Commitment Limit

• Indian entities: Up to 400% of net worth as per the last audited balance sheet.
• Individuals: Within the Liberalised Remittance Scheme (LRS) limit of USD 250,000 per financial year.

4. Valuation of Investment

• If investment involves acquisition of an existing foreign entity or a stake exceeding certain thresholds, valuation is required as per internationally accepted pricing methodology.

5. Form FC Filing

• File Form FC before making any financial commitment or outward remittance.
• Documents include:
  • Valuation certificate (if applicable)
  • Auditor’s certificate
  • NOC from lender banks/investigating agencies (if applicable)

6. Submit to Authorised Dealer (AD) Bank

• Submit Form FC and all documents to your designated AD Category-I Bank.

7. Obtain Unique Identification Number (UIN)

• RBI allots a UIN for each foreign entity.
• Quote UIN in all future correspondence and filings.

8. Evidence of Investment

• Retain and submit share certificates or equivalent proof to the AD bank within 6 months of remittance.

9. Route Transactions Through AD Bank

• All ODI-related transactions must be routed through the designated AD Bank branch.

10. Annual Performance Report (APR)

• File Form APR by December 31 each year for each foreign entity where ODI exists.

11. Foreign Liabilities and Assets (FLA) Return

• File the FLA return annually by July 15 on the FLAIR portal.

12. Repatriate Dues

• Repatriate all dues such as dividends and interest on loans to India within 90 days of receipt.

13. Disinvestment

• ODI disinvestment is allowed subject to:
  • Minimum 1-year holding
  • No outstanding dues
  • Valuation norms adhered to
  • Past APR filings completed

📝 ODI Under the Approval Route

When the investment does not qualify under the Automatic Route, approval must be sought from the RBI or the Central Government (in sensitive sectors).

1. Prepare Proposal

Include:

• Nature and structure of investment
• Justification for approval
• Diagram of group structure
• Valuation report (if applicable)
• Sector-specific approvals
• Board resolution
• NOC from banks/investigative agencies (if required)
• Properly indexed & numbered documents

2. Submit to AD Bank

• Submit proposal along with Form FC and documents to your designated AD Bank.

3. RBI Review Process

• AD Bank forwards the proposal to: mathematicaCopyEditThe Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Overseas Investment Division, Amar Building, 5th Floor, Sir P. M. Road, Fort, Mumbai – 400001
• If government approval is required, RBI forwards the case to the Central Government.

4. Track UIN

• Post-approval, RBI issues a UIN for the foreign entity.

5. Route Transactions Through AD Bank

• Ensure all financial commitments and disbursements are routed through the approved AD Bank branch.

6. Evidence of Investment

• Retain and submit share certificates or equivalent to AD Bank within 6 months of remittance.

7. Annual Performance Report (APR)

• Submit Form APR by December 31 each year.

8. Foreign Liabilities and Assets (FLA) Return

• Submit FLA return on FLAIR portal by July 15 annually.

9. Repatriate Dues

• Repatriate all earnings (dividends, interest, etc.) from the foreign entity within 90 days.

10. Disinvestment

Permitted subject to:

• Holding for at least 1 year
• Valuation as per RBI norms
• No outstanding obligations
• Submission of all previous APRs

📌 Conclusion

ODI under FEMA (Overseas Investment) Rules, 2022, requires a well-documented and process-driven approach—especially with reporting timelines and sector-specific restrictions. Failure to comply can attract penalties under FEMA.

Whether you are an Indian entity expanding overseas or an individual investing abroad, it’s crucial to:

• Choose the right route (automatic/approval)
• Maintain transparent documentation
• Comply with all statutory reporting and repatriation obligations