Q1. Who can invest in India?
Ans: Any individual residing outside India or any
entity
incorporated outside India is eligible to invest in India under the current FDI Policy, subject to the
applicable laws and sectoral conditions. However, investments made by entities or citizens of
countries which share land borders with India (including Bangladesh and Pakistan) must be first
approved by the Government of India. These types of investments are only allowed under Government
Route and are prone to further regulatory checks.
Q2. Can residents of Nepal and
Bhutan invest in India?
Ans: Yes. Citizens and entities from Nepal and Bhutan
can invest in Indian companies under the following conditions:
- Investment should be done in Indian rupees.
- The money will have to enter the system via regular banking systems.
- Repatriation benefits are permitted under the condition that they meet the RBI regulations.
Q3. What types of instruments can
Indian companies issue to foreign investors?
Ans: Indian companies are able issue:
- Equity Shares
- Fully, compulsorily, and mandatorily convertible debentures
- Fully, compulsorily, and mandatorily convertible preference shares
Under the FDI policy, these instruments are considered as equity. Such instruments as not convertible
or optionally convertible are regarded as debt instruments and are subject to External Commercial
Borrowing (ECB) standards under the Reserve Bank of India regulations.
Q4. In which Indian entities can
FDI be made?
Ans: FDI is allowed in:
- Private Limited Companies
- Public Limited Companies
- LLPs (Limited Liability Partnerships), subject to sectoral conditions
This includes startups, MSMEs, and large corporations.
Q5. Is FDI allowed in Partnership
Firms or Proprietorships?
Ans: Yes, but restricted:
Without repatriation (freely allowed):
- NRIs/PIOs are permitted to invest in case:
- The money is deposited through the inward remittance or NRE/NRO/FCNR accounts.
- Business is not in prohibited sectors (like agriculture, real estate, etc.)
- Investment is non-repatriable
With repatriation:
- It has to be approved beforehand by RBI and Government of India.
Q6. What is the time limit for
issuing shares against FDI?
Ans:
- The shares should be issued within 60 days (reduced to 180 days previously) of the receipt of
funds.
- Unless issued, funds have to be refunded within 15 days.
A breach of non-compliance is seen as a contravention under Foreign Exchange Management Act (FEMA).
Q7. How is the issue price of
shares determined for foreign investors?
Ans: The price should be based on the fair value
standards:
- Listed companies: As per Securities and Exchange Board of India (SEBI) guidelines
- Unlisted companies:
- Valuation by Chartered Accountant / Merchant Banker
- According to the internationally recognized techniques (e.g. DCF technique)
The issue of shares must not be below the fair value.
Q8. What are the entry routes for
FDI in India?
Ans: FDI can be made through:
1. Automatic Route
- No previous permission needed.
- Relevant to the majority of the sectors.
2. Government Route
- Government had to give prior approval.
- Processed through appropriate ministries (FIPB has since been abolished; now done through DPIIT
and administrative ministrie
Q11. Which sectors are prohibited
for FDI in India?
Ans: FDI is completely prohibited in:
- Lottery business (including online lotteries)
- Gambling and betting (including casinos)
- Chit funds
- Nidhi companies
- Trading in Transferable Development Rights (TDRs)
- Real estate business (excluding development of townships, construction projects, etc.)
- Manufacturing of tobacco products
- Atomic energy
- Railway operations (except permitted infrastructure segments)
Also, foreign technology collaborations are prohibited in:
- Lottery business
- Gambling and betting
