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“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 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 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.
