ODI vs OPI: Differences, Examples & RBI Compliance Guide

In August 2022, the Ministry of Finance and the Reserve Bank of India introduced the Foreign Exchange Management (Overseas Investment) Rules, 2022, Foreign Exchange Management (Overseas Investment) Regulations, 2022 and Foreign Exchange Management (Overseas Investment) Direction, 2022.

Together, they brought greater clarity to the existing framework governing overseas investment and introduced the concept of Overseas Direct Investment (ODI) and Overseas Portfolio Investment (OPI).

In this article, we explore the difference between ODI and OPI, and understand the guidelines pertaining to them.

• Overseas Direct Investment (ODI) can be made by way of acquisition of unlisted equity capital, subscription to MOA, investment of 10% or more in equity capital or investment with control.
• Overseas Portfolio Investment (OPI) is an investment in foreign securities other than ODI. Investments with less than 10% equity capital and without control are also treated as OPI. They can only be made up to 50% of the net worth of an Indian entity on the date of the last audited balance sheet.
• Financial commitment, which includes ODI, debt in foreign entities in which ODI has been made and non-fund based facilities, can only be made up to 400% of net worth of the Indian entity on the date of the last audited balance sheet.
• Overseas investments made by resident individuals are subject to a ceiling of $250,000, as specified in the Limited Remittance Scheme (LRS).
• ODI and OPI both have certain reporting requirements. Delayed reports can be submitted to the AD bank with Late Submission Fees (LSF). LSF starts at Rs. 7500 and increases according to the amount involved and the number of years of delayed report.

Overseas Direct Investment, or ODI, refers to investments made by an Indian entity by way of:

1. Acquisition of unlisted equity capital of a foreign entity
2. Subscription to memorandum of association (MOA)
3. Investment in 10% or more of the paid-up equity capital of a listed foreign entity
4. Investment with control in a listed foreign entity

The manner of making ODI include:

• Subscription to memorandum of association
• Purchase of equity capital
• Swap of securities 
• Rights or bonus issue
• Conversion of receivables into shares
• Merger, demerger or any corporate restructuring

ODI example:

On 25th March, Infosys signed an agreement to acquire 100% equity stakes in two US-based firms, Optimum Healthcare IT and Stratus, for a combined value of $560 million, making it one of the largest ODIs so far in 2026.

Overseas Portfolio Investment, or OPI, is defined as investments made in foreign securities other than ODI. It also excludes investment in unlisted debt instruments. OPI includes investments that are less than 10% of the paid-up equity capital of a listed foreign entity and without control.

Listed entities are allowed to make OPI in any manner as applicable for ODI, including reinvestment, but unlisted entities can only make OPI in :

1. Rights or bonus issue
2. Capitalization of dues
3. Swap of securities 
4. Merger, demerger, or any corporate restructuring

OPI example:

OPIs are usually made through investments in ETFs through a fintech platform or opening a trading account on a large global broker’s platform for buying shares in foreign entities.

The key distinction between ODI and OPI comes down to how much stake you hold and whether you have control over the foreign entity.

ODI involves a deeper, more committed form of investment, while OPI is a lighter, more passive form of investing in foreign securities.

Overseas investments, which include overseas direct investment (ODI) and overseas portfolio investment (OPI), are governed by the Reserve Bank of India and the Department of Economic Affairs of the Ministry of Finance.

Both the RBI and DEA regulate ODI and OPI transactions under the Foreign Exchange Management Act (FEMA), 1999. 

ODI can be made by way of investment in 10% or more of the paid-up equity capital of a listed foreign entity or investment with control over management or policy decisions, even if it is below 10%. Any investment made in a listed foreign entity that is below 10% and without control is considered an OPI.

The Foreign Exchange Management (Overseas Investment) Rules, 2022 have specified that any overseas investment that qualifies as an ODI continues to be considered the same even if the investment levels fall below 10%.

ODI and OPI are permitted to Indian entities, resident individuals, and registered trusts and funds, but each of them faces different regulatory requirements.

1. Indian entities

Indian entities that can make ODI and OPI include companies incorporated in India, Limited Liability Partnerships, and registered partnership firms. These entities should be in operation for 3 years or must meet general bona fide norms before making an ODI or OPI.

2. Resident individuals

Resident individuals make ODI and OPI under the Liberalised Remittance Scheme (LRS) and are only permitted to make overseas investment up to USD 250,000 per financial year.

Moreover, they can only invest in listed or unlisted equity shares and listed debt instruments. Investment in unlisted debt instruments and direct lending is prohibited for resident individuals.

3. Registered trusts and funds

Registered trusts and funds that are engaged in educational, hospital and religious activities are permitted to make overseas investments. Their ODI and OPI can only be made in a similar sector and require prior approval.

Both ODI and OPI can be made through the automatic route, which does not require prior approval from the RBI. This applies to entities whose overall ODI does not exceed 400% of their net worth recorded on the last audited balance. In the case of OPI, the overall investment should not exceed 50% of the entity's net worth.

But in certain cases, Indian entities require RBI approval to make ODI. This is applicable in the following cases:

1. When financial commitment exceeds 400% of the net worth of the entity
2. When investment is made in strategic sectors such as oil and gas, mineral ores, coal, etc. 
3. When investment is made in restricted sectors
4. When the entity is under an investigation

ODI and OPI can either be made by resident individuals under the Liberalised Remittance Scheme (LRS) or by an Indian entity. Both of them are taxed differently.

1. Resident Individuals

LRS allocates $250,000 in outlays to resident individuals for spending money abroad. This includes foreign trips, education and investments. For overseas investments of Rs 7 lakh or more in a financial year, whether ODI or OPI, the authorised dealer bank collects a 20% TCS.

All foreign investment made by resident individuals has to be disclosed in Schedule “Foreign Assets” on the Indian tax return.

2. Indian Entities

Indian entities that make overseas direct investment are not subjected to TCS, but Indian companies that hold at least 26% equity share capital in a foreign company have to pay preferential tax of 15% on dividends received from the same.

As per the Foreign Exchange Management (Overseas Investment) Regulations, 2022, the overall financial commitment, which includes ODI, debt in a foreign entity in which ODI has been made and non-fund based facilities, cannot exceed 400% of the net worth of the Indian entity that was recorded on its last audited balance sheet.

OPI and ODI made by resident individuals are subject to the ceiling of USD 250,000 annually, which has been specified in the Liberalised Remittance Scheme (LRS). LRS operates under FEMA, 1999. It has enabled resident individuals to remit funds across borders for permitted current and capital account transactions.

Resident individuals can make overseas investment by way of:

1. ODI in a foreign entity not engaged in financial services activity and which does not have a subsidiary or step-down subsidiary where the resident individual has control in the foreign entity

1. OPI, including reinvestment

1. ODI or OPI by way of: 

• Capitalization of dues
• Swap of securities
• Right of bonus issue
• Acquisition through gift or inheritance
• Acquisition of sweat equity shares
• Acquisition of shares or interest under Employee stock ownership plan or employee benefit scheme

The FEMA regulations for overseas investment require all investors that have made ODI and OPI to submit certain reports to designated authorised dealer banks, unless specified otherwise in the regulations, in the format provided by the Reserve Bank of India. Reporting requirements are different for ODI and OPI.

ODI reporting requirements:

• Form ODI Part I has to be submitted to the AD bank at the time of making the overseas direct investment. Form FC is required at the time of actual remittance of funds.
• Form FC is again required to be submitted at the time of disinvestment and restructuring. It has to be submitted within 30 days of receiving proceeds or restructuring. 
• Annual performance report (APR) for the accounting year relevant to the foreign entity should be submitted on or before 31 December every year. Where the foreign entity's accounting year itself ends on 31 December, the APR may be submitted by 31 December of the following year.
• Annual return on foreign liabilities and assets has to be submitted to the Department of Statistics and Information Management of RBI, on or before July 15 every year. This does not apply to resident individuals.

OPI reporting requirements:

• Form OPI has to be submitted at the time of making OPI. It’s a semi-annual report. It must be submitted within 60 days from the end of each half-year period, i.e., by end of May (for the half-year ending March 31) and by end of November (for the half-year ending September 30). Resident individuals do not require filling this form
• Indian companies have to submit Form OPI at the time of acquisition of ESOPs.

The Foreign Exchange Management (Overseas Investment) Rules, 2022 specify that Indian residents are restricted from making ODI in foreign entities engaged in: 

1. Real estate activity
2. Gambling
3. Trading in financial products linked to the Indian rupee, unless specified by the RBI

Real estate activity refers to buying and selling of real estate or trading in Transferable Development Rights. This excludes activities like development of township, construction of residential or commercial premises, or infrastructure projects, whether for sale or lease.

Apart from this, ODI in foreign start-ups can only be made out of internal accruals of the Indian entity or own funds of an Indian resident.

The overseas investment rules also state that Indian residents are prohibited from making ODI in foreign entities that directly or indirectly invest in India, resulting in a structure that exceeds two layers of subsidiaries.

This is known as the round-tripping restriction, and it does not apply to OPI made by Indian residents. The round-trip restriction also does not apply to the following Indian entities.

• Banking companies
• Systematically important non-banking financial companies (NBFCs)
• Insurance companies
• Government companies

The penalties for non-compliance with ODI and OPI reporting have been included in the Foreign Exchange Management (Overseas Investment) Directions, 2022. It specifies that in case of delays in submitting the required report, the Indian entity can submit it along with a late submission fine (LSF).

The LSF starts at Rs. 7500 and increases according to the delay in years and the amount involved in delayed reporting. The formula for late submission fees is:

7500 + (0.025% x A x n)

Where,

A= amount involved in delayed reporting

n= number of years of delayed submission

The option for making delayed submissions is only available for up to 3 years. After this time period, the entity will have to face penal action according to the provisions of FEMA, 1999.

ODI and OPI have different investment limits and reporting obligations. ODI has bigger capital at stake as it involves acquiring unlisted equity and investments that are either 10% or more of the paid-up equity capital of a listed foreign entity, or with control over management and policies. They are also more regulated compared to OPIs.

If you are willing to make a long-term commitment with your overseas investment and have a higher interest in managing the foreign entity, you should opt for ODI. But if your goal is simply to make a profit on your investments, you should opt for OPI.

Overseas Direct Investment and Overseas Portfolio Investment open opportunities for Indian businesses and resident individuals to expand their operations abroad and acquire external sources of income.

Before you decide to invest in a foreign entity, it is essential that you familiarise yourself with rules and regulations concerning ODI and OPI, so that you fulfil your reporting obligations and stay compliant.

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