Overseas Direct Investment

According to Foreign Exchange Management (Overseas Investment) Rules, 2022, Overseas Direct Investment (ODI) means:

(a)Acquisition of any unlisted equity capital or subscription as a part of the Memorandum of Association of a foreign entity, or

(b)Investment in 10% or more of the paid-up equity capital of a listed foreign entity, or

(c)Investment with control where investment is less than 10% of the paid- up equity capital of a listed foreign entity.

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 International a Financial Service Centre (IFSC).

Provided that OPI by 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 instruments are:

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.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 4A(i) (Syllabus 2022).

Any person being a registered Trust or a registered Society engaged in the educational sector or which has set up hospitals in India may make Overseas Direct Investment in a foreign entity with the prior approval of the Reserve Bank, subject to the following conditions, namely: —

(i)the foreign entity is engaged in the same sector that the Indian Trust or Society is engaged in;

(ii)the Trust or the Society, as the case may be, should have been in existence for at least three financial years before the year in which such investment is being made;

(iii)the trust deed in case of a Trust, and the memorandum of association or rules or bye-laws in case of a Society shall permit the proposed Overseas Direct Investment;

(iv)such investment have the approval of the trustees in case of a Trust and the governing body or council or managing or executive committee in case of a Society;

(v)in case the Trust or the Society require special licence or permission either from the Ministry of Home Affairs, Central Government or from the relevant local authority, as the case may be, the special licence or permission has been obtained and submitted to the designated AD bank.

Thus, Swarna Trust will not get approval from RBI to invest in a foreign entity because trust is in existence for less than 3 years.

(5 Marks)

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 2(a) (Syllabus 2022).

Obligations of the Person Resident in India making Overseas Direct Investment (ODI) are as under:

1.Submission of investment evidence within 6 months: A person resident in India acquiring equity capital in a foreign entity, which is reckoned as ODI, shall submit the evidence of investment to the Authorise Dealer (AD) bank within six months, failing which the funds remitted overseas shall be repatriated within the said period of six months.

2.Retention and verification of documents by AD bank: The evidence of investment shall be retained by the designated AD bank, who shall monitor the receipt of required documents and satisfy themselves about the bona fides of the documents so received.

3.Submission of Form FC before initial ODI: Form FC shall be submitted along with requisite documents to AD bank for obtaining Unique Identification Number (UIN) on or before making initial ODI.

4.AD bank’s role in UIN allotment: The AD bank after due verification shall report the details in the OID application for allotment of UIN.

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

6.UIN is not RBI 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.UIN is for database tracking: The issue of UIN only signifies taking on record of the investment for maintaining the database.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 4A(ii) (Syllabus 2022).

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.

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.

A person resident in India other than a resident individual making any Overseas Portfolio Investment (OPI) or transferring such OPI by way of sale shall report such investment or transfer of investment within sixty days from the end of the half-year in which such investment or transfer is made as of September or March-end.

Provided that in case of OPI by way of acquisition of shares or interest under Employee Stock Ownership Plan or Employee Benefits Scheme, the reporting shall be done by the office in India or branch of an overseas entity or a subsidiary in India of an overseas entity or the Indian entity in which the overseas entity has direct or indirect equity holding where the resident individual is an employee or director.

Any acquisition of foreign securities through conversion of Indian Depository Receipts (IDRs)

shall be duly reported as ODI or OPI, as applicable.

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. It is also clarified that where APR is required to be filed jointly, either one investor may be authorised by other investors for filing APR, or such persons may jointly file the APR.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 4(b) (Syllabus 2022).

Rule 19 of the Foreign Exchange Management (Overseas Investment) Rules, 2022 provides that unless otherwise provided in FEMA or these Rules, no person resident in India will make Overseas Direct Investment (ODI) in a foreign entity engaged in a. real estate activity b. gambling in any form and c. Dealing with financial products linked to the Indian rupees without specific approval of Reserve Bank.

Any ODI in start-up recognised under the laws of the host country or host jurisdiction as the case maybe, shall be made by an Indian entity only from internal accruals whether from the Indian entity or group or associate companies in India and in case of resident individuals from own funds of such an individual.

No person resident in India shall make financial commitment in a foreign entity that has invested or invest into India, at the time of making such financial commitment or at any time thereafter either directly or indirectly, resulting in a structure with more than two layers of subsidiaries.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 2(c) (Syllabus 2022).

Rule 21(1) of FEM (Overseas Investment) Rules, 2022 provides that save as otherwise provided in the Act or this rule, a person resident in India shall not acquire or transfer any immovable property situated outside India without general or special permission of the Reserve Bank of India. However, following property excluded -

(a)held by a person resident in India who is a national of a foreign State;

(b)acquired by a person resident in India on or before the 8th day of July, 1947 and continued to be held by such person with the permission of the Reserve Bank;

(c)acquired by a person resident in India on a lease not exceeding five years.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 3(b)(i) (Syllabus 2022).

(i)Rule 21(2) of FEM (Overseas Investment) Rules, 2022 provides that notwithstanding anything contained in sub-rule (1) a person resident in India may acquire immovable property outside India by way of inheritance or gift or purchase from a person resident in India who has acquired such property as per the foreign exchange provisions in force at the time of such acquisition.

(ii)A person resident in India may acquire immovable property outside India from a person resident outside India–

a)by way of inheritance;

b)by way of purchase out of foreign exchange held in RFC account;

c)by way of purchase out of the remittances sent under the Liberalised Remittance Scheme instituted by the Reserve Bank. Provided that such remittances under the Liberalised Remittance Scheme may be consolidated in respect of relatives if such relatives, being persons resident in India, comply with the terms and conditions of the Scheme;

d)jointly with a relative who is a person resident outside India;

e)out of the income or sale proceeds of the assets, other than ODI, acquired overseas under the provisions of the Act.

(iii)an Indian entity having an overseas office may acquire immovable property outside India for the business and residential purposes of its staff, as per the directions issued by the Reserve Bank from time to time;

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 3(b)(ii) (Syllabus 2022).