RBI/ FEMA Compliance

Any company that wants to carry out an investment outside India, must comply with the relevant provisions of the Reserve Bank of India (RBI). This would be applicable even if a foreign investor invests in the capital or shares of an Indian company. Any form of transaction which involves the transfer of funds outside India must be compliant with the provisions of the Foreign Exchange Management Act, 1999. The main regulatory authority for foreign exchange in India is the Reserve Bank of India (RBI).

Remittances under RBI/ FEMA

Any remittance or transfer of funds from India must be carried out through an authorized bank or an authorized dealer. An authorized dealer is an institution which is permitted by the RBI to carry out foreign exchange remittances.

Routes of Foreign Exchange in India

There are currently two routes for foreign investment in India which include:

  • Automatic Route
  • Approval Route

Automatic Route- Under this route, 100% foreign investment is allowed in permitted sectors. There is no need of securing any government approval for foreign investment through this route.

Approval Route- Under this route, government approval is required for any form of foreign investment in any sector. Any company planning to invest outside India would require securing an approval from the respective authority.

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Insight/FAQ

1. What is the meaning of inbound investment under FEMA?

Inbound Investment means a foreign direct investment which is made by a foreign company in India.

2. What is the meaning of outbound investment under FEMA?

An outbound investment means and includes any form of investment which is made outside India. ODI is an outbound investment.

 

List of Services under RBI/FEMA

Overseas Direct Investment (ODI)

Overseas Direct Investment or known as ODI is any investment which is made by an Indian company in the capital of a foreign joint venture or a wholly owned subsidiary. When an investment is made through the ODI route there are different approvals which must be secured.

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ECB Advisory

External Commercial Borrowings are commercial loans which are taken by public sector undertakings and other companies. Foreign institutional investors provide such loans to companies.

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Valuation under FEMA

Valuation of securities is carried out under the Foreign Exchange Management Act (FEMA) by a SEBI registered merchant banker.

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Investments made by Individuals

Any investment can be made by an individual outside India. Under the liberalized remittance scheme (LRS) an investment of USD 2,50,000 can be made outside India.

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FDI Advisory

Any investment which is made in India from an overseas foreign entity is known as Foreign Direct Investment.

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