The Foreign Exchange Management (Overseas Investment) Rules, 2022, read with the accompanying Regulations and Directions issued by the Reserve Bank of India, constitute a comprehensive overhaul of the framework governing outbound investments by Indian residents and entities. The new framework, which came into force in August 2022, replaces the earlier Overseas Direct Investment (ODI) regulations and introduces several significant changes.
The most material change for corporate investors is the expanded definition of "Overseas Investment", which now captures a broader range of capital instruments and arrangements. Indian entities making outbound investments must carefully map each contemplated investment against the new definitions to determine whether it constitutes an Overseas Direct Investment (ODI), an Overseas Portfolio Investment (OPI), or falls within one of the specified exceptions.
The new rules also impose enhanced due diligence obligations on the investee entity, post-investment reporting requirements, and restrictions on investing in entities with material operations in jurisdictions identified as non-cooperative by the Financial Action Task Force. These requirements apply even to investments that were permissible under the old ODI framework.
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