FDI

Foreign Direct Investment (FDI) is investment by a non-resident in the equity of an Indian company. Governed by the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (NDI Rules) and the FDI Policy issued by DPIIT (refreshed periodically; the Consolidated FDI Policy 2020 is the latest comprehensive version).

Two routes:

• Automatic Route — no prior approval required from the Government or RBI. The Indian company simply reports the inward remittance and allotment to the RBI through its AD bank. This is the route for most tech / SaaS / consumer / B2B sectors.
• Government Route — prior approval from the administrative ministry / department acting on behalf of DPIIT. Required for sectors that are sensitive (defence, telecom above caps, broadcasting, print media, multi-brand retail, banking above caps) and for any investment from countries that share a land border with India (i.e., China, Pakistan, Bangladesh, etc. — Press Note 3 of 2020).

Sector caps (selected — verify current FDI Policy):

• IT / SaaS / e-commerce (marketplace only): 100% Automatic
• Insurance: 74% Automatic
• Defence: 74% Automatic + balance Government
• Telecom: 100% Automatic
• Print media: 26% Government
• Multi-brand retail: 51% Government (with conditions)
• Lottery, gambling, atomic energy: prohibited

Eligible instruments (NDI Rules):

• Equity shares
• Compulsorily convertible debentures (CCDs)
• Compulsorily convertible preference shares (CCPS)
• Share warrants (with prescribed conditions)
• Convertible notes issued by DPIIT-recognised startups (special carve-out)

Compliance & reporting:

• FC-GPR — filed with RBI through AD bank within 30 days of allotment to a non-resident.
• FC-TRS — filed within 60 days of transfer of shares between residents and non-residents.
• FLA Return — annual filing with RBI by July 15 every year by every Indian company that has received FDI or made ODI.
• Annual Performance Report (APR) — for ODI structures.

Pricing guidelines: Issue price to a non-resident cannot be less than the fair value of the security as determined by a SEBI-registered Merchant Banker or Chartered Accountant per internationally accepted valuation methodologies (DCF, CCM).

Press Note 3: Any FDI from a land-bordering country requires Government approval irrespective of sector or instrument — this catches many indirect investment flows.