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Overseas Direct Investments (ODI)
Overseas investments (or financial commitment) in Joint Ventures (JV) and Wholly Owned Subsidiaries (WOS) have been recognized as important avenues for promoting global business by Indian entrepreneurs. Transfer of technology and skill, sharing of results of R&D, access to wider global market, promotion of brand image, generation of employment and utilization of raw materials available in India and in the host country are other significant benefits arising out of such overseas investments (or financial commitment). They are also important drivers of foreign trade through increased exports of plant and machinery and goods and services from India and also a source of foreign exchange earnings by way of dividend earnings, royalty, technical know-how fee and other entitlements on such investments (or financial commitment).
Overseas direct investment (ODI) comprises of:
- Investment by way of contribution to the capital of a foreign entity
- Subscription to the Memorandum of Association of a foreign entity
- By way of purchase of existing shares of a foreign entity either by market purchase or private placement or through stock exchange
- Does not include portfolio investment
Overseas direct investment can be made by:
They are generally termed as Indian Party (IP) Resident Individuals (RI) under the Liberalized Remittance Scheme (LRS) are also allowed to make investments overseas under ODI framework. According to the prevailing regulations, resident individuals may remit up to USD 2,50,000 or its equivalent, per financial year.
- Dedicated & experienced product expert to assist in advisory/structuring/guidance and resolution of issues.
- Assistance in completion of documentation
- Timely arrange approvals from regulatory
- Issuance of No Objection Certificate for creation of charge on assets.
- Hedging services in all major currencies
- Assist in submission of Annual Performance Reports (APR)
- Funding to JV/WOS through our overseas /GIFT city branches.
Overseas investments can be made either under Automatic route or Approval route.
Overseas Direct Investment (ODI) can be under Automatic route, provided:
- Financial commitment by Indian Party does not exceed 400% of its net worth and/or is within USD 1 billion.
- The Indian Party should not be on Reserve Bank’s Exporters' caution list / list of defaulters to the banking system circulated by the Reserve Bank / Credit Information Bureau (India) Ltd. (CIBIL) / or any other credit information company as approved by the Reserve Bank or under investigation by any investigation / enforcement agency or regulatory body.
- 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.
- Indian Party is required to report its investments in Form ODI Part I to AD Bank along with other documents.
- Valuation requirements should be complied with.
Transactions which do not comply with the conditions above would require prior approval of RBI.
The prohibitions/restrictions on overseas investments are :
- InvestmentInvestment in foreign entities engaged in Real Estate business or Banking business (RBI approval route only) {Real estate business means buying and selling or real estate or trading in TDRs but does not include development of townships/construction of residential /commercial premises, roads/bridges}
- An Indian Party is also prohibited from investing in an overseas entity, which offers financial products linked to the Indian Rupee (such as non-deliverable trades involving foreign currency, stock indices linked to the Indian market, rupee exchange rates, etc.) and any investments in these entities, need prior approval from the Reserve Bank of India.
- Investment in Pakistan permissible only under Approval Route
- Investment in Nepal permissible only in Indian Rupees
- Investment in non-cooperative countries/territories declared by FATF.
Method of funding:
Investment (or financial commitment) in an overseas JV / WOS may be funded out of one or more of the following sources:
- Drawal of foreign exchange from an AD bank in India;
- Capitalization of exports;
- Swap of shares (with compliance of valuation guidelines);
- proceeds of External Commercial Borrowings (ECBs) / Foreign Currency Convertible Bonds (FCCBs);
- in exchange of ADRs/GDRs issued in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993, and the guidelines issued thereunder from time to time by the Government of India.
For documentation – Please reach out to your nearest branch or contact your relationship manager for further information.
Product offering is subject to certain eligibility criteria as per Bank's internal policy and is subject to Bank's discretion.