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ODI and its compliances


Investment outside the country’s territory by way of capital contribution, subscription to the memorandum of foreign entity and acquisition of shares by way of market purchase, private placement or through the stock exchange in a joint venture or wholly-owned subsidiaries is termed as overseas direct investment.

Routes through which ODI can be made

ODI under automatic route
The Indian party should approach the authorized dealer bank with prescribed documents and an application in the form ODI to affect remittances towards such investments. Conditions for ODI under automatic route:

  • Financial commitment that can be made by the Indian party should not exceed USD 1 billion or 400% of its net worth.
  • The Indian party should not be on RBI’s exporters’ caution list or under investigation by any investigation agency.
  • The Indian party should route all the transactions related to investment in a JV/WOS through a single branch of AD bank designated by the Indian party.
  • Valuation requirements should be complied with.

ODI under approval route
For approval, a particular application in form ODI, with documents prescribed therein, must be yielded through the AD bank. Also, proposals shall require prior approval from RBI if:

  • Investments in the energy and natural resource sector are more than the stipulated limit of financial commitment.
  • Investments are by proprietorship concerns and unregistered partnership firms
  • Registered trusts/societies make investments.

Investors eligible for making ODI

  • Outside direct investment by Indian party-automatic route is available subject to compliance with some conditions.
  • The overseas investment made by third party- an individual can make ODI according to the liberalized remittance scheme.
  • Overseas made by trust/ society- can complete ODI through approval route.

ODI benefits both the company & the country in which the company is going to invest. By investing in other country companies, they expand their international sales. In addition, investment increases opportunities & wages, which is crucial for any country. ODI is being encouraged by many countries. Hence, ODI is now playing a significant role in changing the world.

The sources of funds for making ODI
There are six sources of investment:

  •  Market purchase
  •  Drawl of foreign exchange
  • Swap of shares
  •  Subsidization of exports and other dues and entitlements* – proceeds of ECB / FCCB
  •  In exchange for ADRs / GDRs issued
  •  Balances held in EEFC account
  •  Proceeds of ADR / GDR issue

At MAS, we assist our clients in issuing UIN, coordinating with AD bank & RBI for processing of documents, providing assistance with compliance of ODI with adequate support and guidance from our end. If you have any questions or wish to know more about ODI and its compliances, kindly contact us.


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