An Indian company makes an overseas investment by routing it through its AD (Authorised Dealer) bank under FEMA’s Overseas Investment Rules and Regulations, 2022. Most investments go through the automatic route, within an overall financial-commitment limit linked to the company’s net worth. The investment is reported to the RBI in Form FC, the foreign entity is allotted a Unique Identification Number (UIN), and an Annual Performance Report is filed for that entity every year. Investing abroad without this reporting is a FEMA non-compliance.
| Governing law | FEMA — Overseas Investment Rules & Regulations, 2022 |
|---|---|
| Routed through | The company’s AD (Authorised Dealer) bank |
| Main routes | Automatic route and approval route |
| Reporting form | Form FC, to the RBI through the AD bank |
| Annual filing | Annual Performance Report (APR) for each foreign entity |
What ODI is — and how it differs from OPI
Overseas Direct Investment is an Indian entity putting capital into a foreign entity in a way that gives it a strategic stake. Under the 2022 framework, the distinction that matters is ODI versus OPI. ODI (Overseas Direct Investment) is, broadly, investment in the equity capital of a foreign entity that gives 10 percent or more, or any investment with control. OPI (Overseas Portfolio Investment) is investment that is below that and without control. The two have different rules and different reporting, so the first step is correctly classifying what your company is actually doing.
For most Indian startups and companies, the ODI question comes up when they want a foreign holding company, an overseas subsidiary, or a stake in a foreign business.
The two routes
Under the automatic route, an eligible Indian company can make ODI without prior RBI approval, provided it stays within the overall financial-commitment ceiling — a limit set as a percentage of the company’s net worth — and the foreign entity is in a permitted activity. Most straightforward overseas investments fall here.
The approval route applies when the investment exceeds the limits, or involves a structure or activity that needs the RBI’s specific clearance. Approval-route cases take longer and need a reasoned application through the AD bank.
The 2022 rules also relaxed some older restrictions and clarified the treatment of layering and of round-tripping structures, but those areas still need a careful, fact-specific check before you commit.
The process, step by step
- Classify the transaction. Confirm it is ODI rather than OPI, and that the foreign entity’s activity is permitted.
- Check eligibility and limits. Confirm the company is eligible to invest and that the total financial commitment stays within the net-worth-linked ceiling for the automatic route.
- Board approval. Pass a board resolution approving the overseas investment.
- Route it through the AD bank. The remittance for the investment is made through the company’s Authorised Dealer bank, which acts as the channel to the RBI.
- File Form FC. The investment is reported to the RBI in Form FC through the AD bank, and the foreign entity is allotted a Unique Identification Number.
- Keep evidence. Retain the share certificates or equivalent ownership proof from the foreign entity.
Ongoing compliance — the Annual Performance Report
ODI is not a one-time filing. For every foreign entity in which the Indian company holds an overseas investment, an Annual Performance Report (APR) must be filed each year, based on the foreign entity’s audited accounts. The APR is the obligation companies most often forget once the initial investment is done — and an unfiled APR is exactly the kind of gap that surfaces in a future audit or a later round of due diligence.
Common mistakes
- Treating an overseas investment as a private matter. Money leaving India to buy foreign equity is a regulated transaction with mandatory RBI reporting.
- Mis-classifying ODI as OPI (or the reverse) — the rules and reporting differ.
- Missing the annual APR for the foreign entity.
- Assuming a Delaware or Singapore holding structure is automatically fine — round-tripping and layering need a specific check under the 2022 rules.
Frequently asked questions
How does an Indian company invest in a foreign company?
It routes the investment through its AD bank under FEMA’s Overseas Investment Rules, 2022 — usually on the automatic route within a net-worth-linked limit — reports it to the RBI in Form FC, obtains a Unique Identification Number for the foreign entity, and files an Annual Performance Report each year.
What is the difference between ODI and OPI?
ODI (Overseas Direct Investment) is broadly investment in a foreign entity’s equity giving 10 percent or more, or any investment with control. OPI (Overseas Portfolio Investment) is below that and without control. The two carry different rules and reporting.
What is Form FC?
Form FC is the form used to report an Indian entity’s overseas direct investment to the RBI, filed through the AD bank. It is how the investment is recorded and the foreign entity’s UIN is generated.
What is the Annual Performance Report for ODI?
The APR is an annual filing for every foreign entity in which an Indian company holds overseas investment, based on the foreign entity’s audited financials. It is a recurring obligation, not a one-time filing.
Reviewed by CS Sapna Malpani, a practising Company Secretary in Bangalore who handles FEMA and overseas-investment compliance for Indian companies expanding abroad. This is general information, not legal advice — confirm the current RBI Overseas Investment directions for your transaction. About Sapna Malpani.
Last reviewed: May 2026.