Overseas Direct Investment (ODI)
An Indian Party which intends to invest outside India can make the Investment by following Regulations issued by Reserve Bank of India. Under Overseas Direct Investment or ODI Regulations an investment can be made outside India in a Joint Venture (JV) or Wholly Owned Subsidiary (WOS) either under Automatic Route or Approval Route. The investment is made by contribution to capital, subscription to memorandum of a foreign company, or acquisition of existing shares of a foreign entity by market purchase, private placement or stock exchange.
Here Indian Party shall mean, a company incorporated in India or a body created under an Act of Parliament or a partnership firm registered under the Indian Partnership Act 1932 or a Limited Liability Partnership (LLP) incorporated under the LLP Act, 2008 and any other entity in India as may be notified by the Reserve Bank.
Under Automatic Route, an Indian Party does not require prior approval of Reserve Bank of India for making overseas direct investment in JV or WOS abroad. The Indian Party should approach Authorised Dealer (AD) Bank with prescribed documents and an application in Form ODI to effect remittances towards such investments.
Conditions for ODI under Automatic route:
Proposals that are not covered by conditions under Automatic Route require prior approval from Reserve Bank of India. For approval, a specific application in Form ODI, with documents prescribed therein, is required to be submitted through the AD Bank. Also, proposals shall require prior permission from RBI if:
Overseas Direct Investments by Resident Individuals
The limit of overseas direct investment by the resident individual is governed by the provisions of Liberalised Remittance Scheme. It shall be within the overall limit prescribed by the Reserve Bank of India, as prescribed from time to time. At present, any individual can freely remit up to USD 2,50,000 per financial year. Transactions in excess of USD 2,50,000 require prior approval of RBI.
To know more about general requirement, prohibitions and common violations under ODI, please visit: