The Reserve Bank of India (RBI) issued new guidelines on August 22, 2022, to make foreign investment in shares, immovable properties etc. easier for Indian retail investors. The new framework/guidelines comprise of Rules (framed by Central Government), Regulations and Directions (issued by RBI).
Here are some of the key changes that retail investors who wish to invest outside India or acquire immovable property outside India should know.
New definition of Overseas Direct Investment (ODI) and Overseas Portfolio Investment (OPI)
Overseas Portfolio Investment (OPI) and Overseas Direct Investment (ODI) are two different types of investment routes used by Indian investors to make foreign investments. Under the old regulations/directions, there was no clear distinction between OPI and ODI. Further, OPI was not defined and under ODI, there was no specific mention of the percentage of equity holding proposed to be bought to qualify as ODI/OPI. Retail Investors faced difficulty in determining whether their investment in foreign entities constituted ODI requiring ODI compliance or OPI.
OPI and ODI under new RBI guidelines
What is Overseas Direct Investment?
Overseas Direct Investment
I) Investment in equity of an unlisted foreign company
II) Subscription as a part of the memorandum of association of a foreign entity*,
III) Investment of 10% or more (without control) of the paid-up equity in a listed foreign entity and
IV) Investment of less than 10% of the paid up equity capital, with control, of a listed foreign entity;
Explanation- Explanation- Where an investment by an Indian resident in the equity capital of a foreign entity is classified as ODI, such investment shall continue to be treated as ODI even if the investment falls to a level below 10 per cent of the paid-up equity capital or such person loses control in the foreign entity.
What is Overseas Portfolio Investment?
"Overseas Portfolio Investment" or "OPI" means any investment, other than ODI and certain specified exceptions**. Examples of OPI investments are investment in shares of listed foreign companies with less than 10% stake and no control (for e.g. resident Indian buying stocks of Amazon, Tesla etc. by opening demat account with foreign entity.), investment in listed debt instruments such as bonds of foreign government, foreign entities listed on foreign stock exchange etc.
Provided that OPI by a resident Indian in the equity capital of a listed entity, even after its delisting shall continue to be treated as OPI until any further investment is made in the entity.
Read more at: https://economictimes.indiatimes.com/wealth/invest/how-rbis-new-overseas-investment-rules-will-help-retail-indian-investors-make-foreign-investments/articleshow/94615686.cms
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