Foreign Direct Investment (FDI)

“FDI” or “Foreign Direct Investment” refers to an investment through equity instruments by a resident outside India, in an unlisted Indian company; or in ten per cent or more of the post issue paid-up equity capital, on a fully diluted basis of a listed Indian company. Overseas Investors can invest in India under two routes as mentioned below:

  • Automatic Route: An entry route for FDI, wherein investments made by a resident outside India does not require a prior Reserve Bank or Government approval.
  • Approval Route: An entry route for FDI, wherein investments made by a resident outside India requires prior approval.

Overseas Direct Investment (ODI) in India

Overseas Direct Investment or ODI is an investment 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.

External Commercial Borrowings (ECB)

External Commercial Borrowings are commercial loans widely used by eligible resident entities who raise ECBs from recognised non-resident entities. ECBs should adhere to the criteria like minimum maturity period, maximum all-in-cost ceiling, permitted and non-permitted end-uses, etc. You can raise ECB in INR or any freely convertible Foreign Currency. ECBs can be raised under the automatic route as well as the approval route, under the ECB framework.

  • Automatic Route: The AD Category-I Bank examines the case and gives the approval. Entities wanting to raise ECB under the automatic route may approach an AD Category-I Bank with their proposal along with a duly filled Form ECB. Post approval by AD Category-I Bank, the application along with Form ECB is sent to RBI for issuance of Loan Registration Number (LRN).
  • Approval Route: Borrowers send in their requests to the RBI through their AD Category-I Banks for examination. Such cases are progressed basis RBI approval.