Category B: Normal Route

The proposals not covered by the conditions under the Automatic Route require the prior clearance of the Reserve Bank of India(RBI) for which a specific application along with the documents prescribed therein is required to be made to the Overseas Investment Division in the Foreign Exchange Department of the Reserve Bank of India. The application shall be made in:-

* Form ODB if the investment is for acquiring shares of foreign company engaged in the same core activity in exchange of American Depository Receipts (ADRs)/ Global Depository Receipts (GDRs) issued to the latter or for acquisition of shares of a company outside India,in lieu of fees due to it for the professional services rendered to the foreign company.


* Form ODI in all the other cases.

Requests under the normal route are considered inter alia, by taking into account the following factors:-

* Prima facie viability of the JV/WOS outside India


* Financial position and business track record of the Indian Party and the foreign entity


* Expertise and experience of the Indian party in the same or related line of activity of the JV/WOS outside India


* Contribution to external trade and other benefits which will accrue to India through such investment

Now, the proprietary concerns in India are permitted to invest outside India with prior approval of the Reserve Bank of India, but only by way of acquisition of shares of a foreign company in lieu of the fees for the professional services rendered to the foreign company. It is subjected to the following conditions:-

* The value of shares accepted from each company outside India shall not exceed 50% of the fees receivable by the Indian party from that company, and,


* The Indian party's shareholding in any one company outside India shall not exceed 10% of the paid up capital of the company outside India. The proprietary concerns can apply to the Reserve Bank in Form ODB seeking general permission for 1 year to make such investments.

A Resident individual may apply to the Reserve Bank of India (RBI) for permission to acquire shares in foreign entity offered as consideration for professional services rendered to the foreign entity. The Reserve Bank may grant permission subject to such terms and conditions as are considered necessary:-

* Credentials and net worth of the individual and the nature of his/ her profession


* The extent of his/ her foreign exchange earnings/ balances in his/ her EEFC (Exchange Earner's Foreign Currency) account and/ or RFC (Resident Foreign Currency) account


* Financial and business track record of the foreign entity


* Potential for foreign exchange inflows to the country


* Other likely benefits to the country

An Indian party which has made direct investment abroad is under the following obligations:-

* Receive and submit to Reserve Bank of India, the share certificates or any other document as an evidence of investment in the foreign entity to the satisfaction of the Reserve Bank within 6 months or such further period as RBI may permit from:- (a) the date of effecting remittance; or (b) the date on which the amount to be capitalised became due to the Indian party; or (c) the date on which the amount due was allowed to be capitalised.


* Repatriate to India, all dues receivable from the foreign entity, like dividend, royalty, technical fees, etc., within 60 days of its falling due or such further period as the Reserve Bank of India may permit; and,


* Submit with the Reserve Bank of India an Annual Performance Report in Form APR in respect of each JV/ WOS outside India set up or acquire by the Indian party and other reports or documents as may be stipulated by the Reserve Bank. This is to be done every year within 60 days from the date of expiry of the statutory period as prescribed by the respective laws of the host country for finalisation of the audited accounts of the JV/WOS outside India or such further period as may be allowed by the Reserve Bank of India.