Setting up of Branch/Project/Liaison Offices in India by a person resident outside India

Direct investment outside India means investments, either under the Automatic Route or the Approval Route, by way of contribution to the capital or subscription to the Memorandum of Association of a foreign entity, signifying a long-term interest in the overseas entity (setting up / acquiring a Joint Venture (JV) or a Wholly Owned Subsidiary (WOS).

 

An Indian Party can make overseas direct investment in any bonafide activity except those that are specifically prohibited. The Indian Party intending to make a direct investment under the automatic route is required to fill up form ODI duly supported by the documents listed therein, i.e., certified copy of the Board Resolution, Statutory Auditors Certificate and Valuation Report for making the investment/remittance.

 

Investment in Pakistan is prohibited. Investments in Nepal can be only in Indian Rupees. Investments in Bhutan are allowed in Indian Rupees and in freely convertible currencies.

 

Set up of imports of goods to India.

• Import licenses
• Import remittances and requisite forms
• Time limit for settlement of imports
• Import evidence
• Import factoring
• Advance remittances for services to be rendered

Export of goods and services

• Guidance relating to export of goods and services
• Guidance relating to realization of export proceeds
• Guidance relating to duty drawbacks on export incentives.
• Write off of unrealized export bills and –surrender of export invoices

EXIM bank credit lines and relevant business opportunities

• Export-Import Bank of India (Exim Bank) has signed agreements with various African and other developing countries, making available to the latter, a Line of Credit (LOC) for financing eligible goods, services, machinery and equipment including consultancy services to be exported from India for the purpose of financing.
• This LOC facility will open the doors of development for the developing nations and array of opportunities for Indian business houses.

Setting up of Branch trading / Offices overseas and acquisition of immovable properties outside India.

Overseas Investment can be made under two routes viz.
(i) Automatic Route
(ii) Approval Route

 

Indian parties are prohibited from making investment in a foreign entity engaged in real estate (meaning buying and selling of real estate or trading in Transferable Development Rights (TDRs) but does not include development of townships, construction of residential/commercial premises, roads or bridges) or banking business, without the prior approval of the Reserve Bank.

 

General permission has been granted to persons residents in India for purchase / acquisition of securities in the following manner:

• (a) Out of the funds held in RFC account;
• (b) As bonus shares on existing holding of foreign currency shares; and
• (c) When not permanently resident in India, out of their foreign currency resources outside India.

General permission is also available to sell the shares so purchased or acquired.

 

An Indian party has been permitted to make investment in overseas Joint Ventures (JV) / Wholly Owned Subsidiaries (WOS), not exceeding 400 per cent of the net worth as on the date of last audited balance sheet of the Indian party, i.e. 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, making investment in a JV/WOS abroad and includes any other entity in India excluding individuals as may be notified by the Reserve Bank.

 

In case of investment in overseas JV / WOS abroad by a registered Partnership firm, where the entire funding for such investment is done by the firm, it will be in order for individual partners to hold shares for and on behalf of the firm in the overseas JV / WOS if the host country regulations or operational requirements warrant such holdings.

 

The Indian Party is required to report such acquisition in form ODI to the AD Bank for submission to the Reserve Bank within a period of 30 days from the date of the transaction.

 

Setting up of an SPV under the Automatic Route is permitted for the purpose of making a investment in JV/WOS overseas.

 

Investment 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;
• Capitalisation of exports;
• Swap of shares
• Proceeds of External Commercial Borrowings (ECBs) / Foreign Currency Convertible Bonds
• In exchange of ADRs/GDRs issued in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and
• Balances held in EEFC account of the Indian party; and
• Proceeds of foreign currency funds raised through ADR / GDR issues.

Prior approval of the Reserve Bank would be required in all other cases of direct investment abroad. For this purpose, application together with necessary documents should be submitted in Form ODI through their Authorised Dealer Category – I banks.