Overseas Direct Investment (ODI) and Overseas Portfolio Investment (OPI) are the two categories of overseas investment open to a person resident in India, defined under the Foreign Exchange Management (Overseas Investment) Rules, 2022. ODI covers unlisted foreign equity, a 10% or larger stake in a listed foreign entity, or any investment that confers control; OPI covers all other permitted investments in foreign securities.
Definition
ODI and OPI are both defined in Rule 2 of the Overseas Investment Rules 2022. ODI means acquiring unlisted equity capital of a foreign entity, subscribing to its memorandum of association, holding 10% or more of a listed foreign entity’s paid-up equity capital, or making any investment that confers control, even where the stake is below 10%. OPI means any investment in foreign securities other than ODI, excluding unlisted debt instruments, derivatives, commodities, and securities issued by a person resident in India who is outside an IFSC.
Governing Provision
The Foreign Exchange Management Act, 1999, provides the overarching legal framework for overseas investments. Specific operations are governed by the Overseas Investment Rules, 2022, as notified by the Central Government, along with the Overseas Investment Regulations and Directions of 2022 issued by the Reserve Bank of India. These mandates, all becoming effective on 22 August 2022, replaced the 2004 regulatory regime. This transition established a definitive statutory boundary between Overseas Direct Investment (ODI) and Overseas Portfolio Investment (OPI), with administration conducted through Authorised Dealer banks.
Key Differences
Classification turns on three tests: whether the foreign company is listed, whether the stake reaches 10% of its paid-up equity, and whether the investment confers control, broadly, an entitlement to 10% or more of the voting rights or the right to appoint a majority of the directors. The same outlay can be ODI or OPI, depending on these tests, and each route carries its own ceiling and reporting form.
| No | Basis | ODI | OPI |
|---|---|---|---|
| 1 | Foreign company | Listed or unlisted | Listed equity and regulated overseas funds |
| 2 | Stake and control | Any unlisted equity, 10%-plus of listed equity, or any stake with control | Below 10% of listed equity, without control |
| 3 | Character | Strategic — control or significant interest | Passive — minority, no control |
| 4 | Indian-entity ceiling | Financial commitment up to 400% of net worth | Up to 50% of net worth |
| 5 | Individual ceiling | Within LRS (USD 250,000 per financial year) | Within LRS (USD 250,000 per financial year) |
| 6 | Reporting form | Form FC | Form OPI |
Related Terms
- Foreign Entity
- Liberalised Remittance Scheme (LRS)
- Authorised Dealer (AD) Bank
- Foreign Direct Investment (FDI)
Frequently Asked Questions
Is a 10% stake in a foreign company ODI or OPI?
Can an OPI later become ODI?
Can an individual resident make both ODI and OPI?
References
- Foreign Exchange Management Act, 1999
- Foreign Exchange Management (Overseas Investment) Rules, 2022
- Foreign Exchange Management (Overseas Investment) Regulations, 2022
- Foreign Exchange Management (Overseas Investment) Directions, 2022
- RBI Master Direction – Overseas Investment (consolidated)
In This Article
Author Bio
Meet Sanjeev Kumar, a distinguished advocate before the Supreme Court of India, High Courts, and National Tribunals. Founding Partner of Juriskps Law Offices, a premier law firm, he specializes in commercial, corporate, tax, arbitration, and IPR matters. His incisive legal insights enrich Setindiabiz’s blog with expert commentary.
