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FDI Policies, Guidelines & Procedures

Foreign Investment’ is investment in an enterprise by a Non-resident irrespective of whether this involves new equity capital or re-investment of earnings. Foreign investment is of two kinds:

Foreign direct investment (FDI)

Foreign Portfolio Investment.

LEGAL BASIS

Foreign Direct Investment by non-resident in resident entities through transfer or issue of security to person resident outside India is a ‘Capital account transaction’ and Government of India and Reserve bank of India regulate this under the FEMA, 1999 and its various regulations.

ELIGIBILTY OF FDI IN RESIDENT ENTITIES

  • Indian companies including those which are micro and small enterprises can issue capital against FDI.
  • FDI is allowed in a Partnership or Proprietary concern on a Non-Repartriation basis.
  • FDI in Trusts other than VCF is not permitted.
  • FDI in resident entities other than those mentioned above is not permitted.

TWO MODES OF FDI

FDI in sectors/activities to the extent permitted under automatic route does not require any prior approval either by the Government or RBI. The investors are only required to notify the Regional Office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares of foreign investors.

Government Approval

FDI in activities not covered under the automatic route require prior government approval. Approvals of all such proposals including composite proposals involving foreign investment/foreign technical collaboration is granted on the recommendations of Foreign Investment Promotion Board (FIPB). The Government of India has taken various effective steps to simplify the Foreign Direct investment policy. The Foreign Direct Investment Policy (FDI Policy) of the Government of India prescribes the foreign investment cap in specified industrial sectors. But in the recent times many activities have been transferred to unrestricted sectors in which 100% Foreign Direct investment is permitted. Broadly, the industrial sectors are categorized as:-

Restricted

Unrestricted Sectors (In all other sectors up to 100% foreign ownership)

Government Policies and Guidelines for Foreign Direct Investment

Detail and comprehensive policy click “FDI Policies”

Procedure for Government Approval

Foreign Investment Facilitation Portal (FIFP) is an online single point interface of the Government of India for investors to facilitate Foreign Direct Investment. This portal is designed to facilitate the single window clearance of applications which are through Government approval route. Upon receipt of the FDI application, the concerned Administrative Ministry/Department process the application as per the Standard Operation Procedure (SOP).