TaxTMI 
TaxTMI 
Overseas Investment
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....s/ constituents with a view to implementing the OI Rules and the OI Regulations. 3. Instructions issued on Overseas Investment by persons resident in India have been compiled in this Master Direction. The list of underlying circulars which form the basis of this Master Direction is furnished in the Annex I. Reporting instructions related to Overseas Investment are provided in Part VIII of Master Direction no. 18 on 'Reporting under Foreign Exchange Management Act, 1999' dated January 01, 2016. AD Category-I Banks may bring the contents of these Directions to the notice of their customers / constituents concerned. 4. This Master Direction has been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law. Yours faithfully (N Senthil Kumar) General Manager Master Direction - Overseas Investment These Directions shall be called Master Direction - Overseas Investment which shall be read with the provisions contained in Foreign Exchange Management (Overseas Investment) Rules, 2022 (hereinafter referred to as "OI Rules") and Foreign Ex....
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....ability company, limited liability partnership, etc. where the liability of the person resident in India is clear and limited. In case of a foreign entity being an investment fund or vehicle, duly regulated by the regulator for the financial sector in the host jurisdiction and set up as a trust outside India, the liability of the person resident in India shall be clear and limited not exceeding the interest or contribution in the fund in any manner. Further, the trustee of such fund shall be a person resident outside India. (ii) "strategic sector" shall include energy and natural resources sectors such as Oil, Gas, Coal, Mineral Ores, submarine cable system and start-ups and any other sector or sub-sector as deemed fit by the Central Government. The restriction of limited liability structure of foreign entity shall not be mandatory for entities with core activity in any strategic sector. Accordingly, Overseas Direct Investment (ODI) can be made in such sectors in unincorporated entities as well. An Indian entity is also permitted to participate in a consortium with other international operators to construct and maintain submarine cable systems on co-ownership basis. AD banks may ....
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....i) "equity capital" means equity shares or perpetual capital or instruments that are irredeemable or contribution to non-debt capital of a foreign entity, which is in the nature of fully and compulsorily convertible instruments. Accordingly, any instrument which is redeemable or non-convertible or optionally convertible shall be treated as debt for the purpose of OI Rules/Regulations/Directions. (viii) "financial commitment" by a person resident in India means the aggregate amount of investment by way of ODI, debt other than Overseas Portfolio Investment (OPI) and non-fund based facility or facilities extended by it to all foreign entities. An Indian entity may lend or invest in any debt instruments issued by a foreign entity or extend non-fund based commitment to or on behalf of a foreign entity, including overseas SDSs of such Indian entity, subject to the following conditions: * the Indian entity is eligible to make ODI; * the Indian entity has made ODI in the foreign entity; * the Indian entity has acquired control in the foreign entity on or before the date of making such financial commitment. (ix) "Overseas Portfolio Investment (OPI)" means investment, other than OD....
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.... Plan (ESOP)/ Employee Benefits Scheme up to 10% of the paid up capital/stock, whether listed or unlisted, of the foreign entity and without control shall also qualify as OPI. g) Any investment made overseas in accordance with schedule IV of the OI Rules in securities as stipulated by SEBI by Mutual Funds (MFs), Venture Capital Funds (VCFs) and Alternative Investment Funds (AIFs) registered with SEBI shall be considered as OPI. (x) "Listed equity capital or instrument" - Wherever a reference is made in these directions or OI Rules or OI Regulations to listed equity capital or a listed instrument overseas, it shall mean that such equity capital or instrument, as the case may be, shall be listed on a recognised stock exchange outside India. Part II - General provisions 2. Exemptions from applicability of OI Rules/Regulations/Directions The provisions contained in the OI Rules/Regulations/Directions shall not apply, and general permission shall be available for acquisition or transfer of any investment outside India made as per rule 4 of the OI Rules. 3. Permission for making overseas investment (1) A person resident in India may make or transfer any investment or financ....
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....l shall be submitted to the following address: The Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Overseas Investment Division, Amar Building, 5th Floor, Sir P. M. Road, Fort, Mumbai 400001. 4. Approval from the Central Government The applications for overseas investment/financial commitment in Pakistan/other jurisdiction as may be advised by the Central Government from time to time or in strategic sectors/specific geographies in accordance with rule 9 of OI Rules shall be forwarded by the AD banks from their constituents to the Reserve Bank as per the laid down procedure for onward submission to the Central Government. 5. 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. 6. No Objection Certificate (NOC) from the lender bank/regulatory body/investigative agency (1) Any person resident in India having an account appearing as a Non-Performing Asset (NPA) or is classified as wilful....
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.... ensure the bona fides of transaction while permitting the invocation of bid-bond guarantee or forfeiture of EMD. 9. ODI in startups Any ODI in startups in accordance with rule 19(2) of OI Rules shall not be made out of funds borrowed from others. The AD bank, before facilitating the transaction, shall obtain necessary certificate in this regard from the statutory auditors/chartered accountant of the Indian entity/investor. 10. Acquisition or transfer by way of deferred payment (1) AD bank shall verify the bona fides of the transactions from the underlying agreement/documents in case of deferment of payment of consideration in accordance with regulation 7 of OI Regulations. The period of deferment shall be defined upfront. In case the remittance towards acquisition of equity capital is to be made post subscription to Memorandum of Association, the period within which such remittance is to be made shall be defined in the underlying agreement/documents/applicable laws else the remittance shall be made on or before acquisition of/setting up of the foreign entity. (2) The part of the payment towards consideration deferred by the person resident in India shall be treated as no....
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....ation, where the price has been approved by the competent Court/Tribunal as per the laws in India and/or the host jurisdiction or (ii) price is readily available on a recognised stock exchange, etc. The policy shall also clearly provide for additional documents such as the audited financial statements of the foreign entity, etc. that may be taken by the AD banks for ascertaining the bona fides in cases involving write-off of the investment. 13. Transfer or liquidation A person resident in India holding equity capital in accordance with OI Rules may transfer such investment in accordance with rule 17 of OI Rules. It is clarified that where the transferor is required to repatriate all the dues before disinvestment, such requirement shall not apply to the dues that do not arise on account of investment in equity or debt like export receivables, etc. 14. Restructuring (1) A person resident in India who has made ODI in a foreign entity, may permit restructuring of the balance sheet by such foreign entity in accordance with rule 18 of OI Rules. The aggregate investment in both the equity and debt of the foreign entity shall be taken into consideration for computing the proportion....
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....or the investment made/to be made in the foreign entity. The issue of UIN only signifies taking on record of the investment for maintaining the database. Further, with effect from June 01, 2012, an auto generated e-mail giving the details of UIN allotted to the foreign entity is forwarded to the AD bank/Indian investor as confirmation of allotment of UIN, and no separate letter is issued by the Reserve Bank. 17. Reporting (1) All reporting with respect to overseas investment by a person resident in India shall be made in accordance with regulation 10 of OI Regulations through the designated AD bank as per the revised reporting forms and instructions contained in the "Master Direction - Reporting under Foreign Exchange Management Act, 1999". The reporting forms can be downloaded from Reserve Bank's website www.rbi.org.in. Any incomplete filing shall be treated as non-submission. (2) Any acquisition of foreign securities through conversion of Indian Depository Receipts (IDRs) shall be duly reported as ODI or OPI, as applicable. (3) The Annual Performance Report (APR) shall be certified by a chartered accountant where the statutory audit is not applicable, including in case of....
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....years from the due date of reporting/submission under OI Regulations. The option of LSF shall also be available for delayed reporting/submissions under the Notification No. FEMA 120/2004-RB and earlier corresponding regulations, up to three years from the date of notification of OI Regulations. g) In case a person resident in India responsible for submitting the evidence of investment or filing any forms/returns/reports, etc. as per OI Regulations/earlier corresponding regulations, neither makes such submission/filing within the specified time nor makes such submission/filing along with LSF as provided in regulation 11 of OI Regulations, such person shall be liable for penal action under the provisions of FEMA, 1999. (3) The LSF may be paid by way of a demand draft drawn in favour of "Reserve Bank of India" and payable at the Regional Office concerned (in accordance with UIN mapping given in the table below). Sr.No UIN with prefix UIN mapped to 1. AH RO Ahmedabad 2. BG RO Bengaluru 3. BL or BY or PJ RO Mumbai 4. BN or CA or GA or GH RO Kolkata 5. CG or JM or JR or KA or ND or PT or WR RO New Delhi 6. HY RO Hyderabad 7. KO or MA RO Chennai 19. Restricti....
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....ldings. (3) Financial commitment by way of debt [regulation 4 of OI Regulations]- AD bank shall facilitate an outward remittance towards financial commitment by way of debt only after obtaining the necessary agreement/documents for ensuring the bona fides of the transaction. An Indian entity shall not lend directly to its overseas SDS. Further a resident individual shall not make financial commitment by way of debt. (4) It is provided with respect to financial commitment by way of Guarantee [regulation 5 of OI Regulations] that- a) In the case of performance guarantee, time specified for the completion of the contract shall be treated as its validity period. b) No prior approval from the Reserve Bank shall be needed for remitting the funds from India on account of invocation of a performance guarantee extended in accordance with OI Rules/Regulations. c) Any guarantee, to the extent of the amount invoked, shall cease to be a part of the non-fund based financial commitment but will be considered as financial commitment by way of debt. Such invocation shall be reported in Form FC. d) Roll-over of guarantee shall not be treated as fresh financial commitment. However, such r....
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....ility, whichever is less. Fund/non-fund based facility for Indian entity. Nil. a debenture trustee registered with SEBI in India. fund based facilities for Indian entity. Nil (6) Financial commitment by way of pledge/charge shall be subject to following conditions: * The value of the pledge/charge or the amount of the facility, whichever is less, shall be reckoned towards the financial commitment limit provided such facility has not already been reckoned towards the limit prescribed; * Overseas lender in whose favour such pledge/charge is created shall not be from any country or jurisdiction in which financial commitment is not permissible under the OI Rules; * the creation/enforcement of such pledge/charge shall be in accordance with the relevant provisions of the Act or rules or regulations made, or directions issued thereunder; * The assets on which charge is being created are not securitised; * The period of charge, if not specified upfront, shall be co-terminus with the period of facility (like loan or other facility) for which charge has been created; * in the event of enforcement of charge created on domestic assets, such domestic assets shall be transferr....
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....le I of the OI rules. The following is further provided: a) Utilisation of the balances held in EEFC account, and the amount raised by issue of American Depository Receipts (ADR)/ Global Depositary Receipts (GDR) and ADR/ GDR stock-swap for making financial commitment shall also be reckoned towards the financial commitment limit. However, financial commitment made through such resources prior to the date of notification of the OI Rules/Regulations shall not be reckoned towards the limit. b) Where the proceeds from External Commercial Borrowings (ECB) are utilised for making financial commitment, the same shall be reckoned towards the financial commitment limit. However, only that part of the ECB shall be reckoned towards the financial commitment limit that exceeds the amount of the corresponding pledge or creation of charge on assets which has already been counted towards the financial commitment limit. 22. Overseas investment by resident individuals With effect from August 05, 2013, resident individuals (single or in association with another resident individual or with an Indian entity) were permitted to make ODI. A resident individual may make overseas investment in accor....
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....ance made towards acquisition of shares/interest under ESOP/Employee Benefits Scheme or acquisition of sweat equity shares, such remittances shall be reckoned towards the LRS limit of the person concerned. 23. Overseas investment by a person resident in India, other than an Indian entity or a resident individual A person resident in India, other than an Indian entity or a resident individual may make overseas investment in accordance with schedule IV of OI Rules. The following is further provided: (1) Mutual Funds (MFs) and Venture Capital Funds (VCFs)/Alternative Investment Funds (AIFs) registered with SEBI may, in accordance with paragraph 2 of schedule IV of OI Rules, invest overseas in securities as stipulated by SEBI within an overall cap of USD 7 billion and USD 1.5 billion, respectively. Further, a limited number of qualified MFs are permitted to invest cumulatively up to USD 1 billion in overseas Exchange Traded Funds, as may be permitted by SEBI. Such investment shall be considered as OPI irrespective of whether the securities are listed or not. (2) MFs/VCFs/AIFs desirous of availing this facility may approach SEBI for necessary permission. Operational modalities r....
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....estment made in IFSC. Such investment, however, shall not be made in any foreign entity engaged in banking or insurance. Such foreign entity in IFSC may have subsidiary/SDS in IFSC. It may also have subsidiary/SDS outside IFSC where the resident individual does not have control in the foreign entity. Resident individual who has made ODI without control shall not acquire control in a foreign entity that subsequently acquires or sets-up a subsidiary/SDS outside India. 25. Acquisition or Transfer of Immovable Property outside India Any acquisition or transfer of immovable property outside India shall be governed by the provisions contained in rule 21 of OI Rules. The following is further provided: (1) An AD bank may allow an Indian entity having an overseas office to acquire immovable property outside India for the business and residential purposes of its staff, provided total remittances do not exceed the following limits as laid down for initial and recurring expenses, respectively: * 15 per cent of the average annual sales/income or turnover of the Indian entity during the last two financial years or up to 25 per cent of the net worth, whichever is higher; * 10 per cent o....
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....ecify the documents which should be verified by the AD banks for ensuring the bona fides of the transactions. In this connection, attention of authorised persons is drawn to sub-section (5) of Section 10 of the FEMA, 1999 which provides that an authorised person shall require any person desiring to transact in foreign exchange to make such a declaration and to give such information as will reasonably satisfy him that the transaction will not involve and is not designed for the purpose of any contravention or evasion of the provisions of the FEMA, 1999 or any rule, regulation, notification, direction or order issued thereunder. AD banks shall put in place a standard policy laying down the requirements or documents or information to be obtained by their branches to ensure compliance with said provisions of FEMA. (4) AD banks shall ensure bona fides of the transaction, compliance with FEMA provisions, compliance with Know Your Customer (KYC) Guidelines and compliance with anti-money laundering guidelines/laws. Any doubtful case/suspicious transaction shall be referred to Directorate of Enforcement (DoE) for further investigation and necessary action. (5) In case of ODI by way of c....