What changed
The definition of Overseas Portfolio Investment (OPI) now includes investment in 'units or any other instrument (by whatever name called)' issued by overseas regulated funds, replacing the earlier narrower 'units' only provision. Additionally, unlisted Indian entities are now permitted to make OPI in investment funds or vehicles set up in International Financial Services Centres (IFSCs), which was previously restricted to listed companies and resident individuals.
What it means for you
Banks and their clients gain greater flexibility in structuring overseas investments, as the revised rules cover a wider range of fund instruments. For lenders, this means more opportunities to facilitate cross-border fund investments for corporate and individual clients, but also requires careful due diligence to ensure compliance with host jurisdiction regulations and OPI limits.
What you must do
- Update internal policies and customer advisories to reflect the expanded definition of OPI instruments beyond 'units'.
- Train compliance teams on the new eligibility for unlisted Indian entities to invest in IFSC-based funds.
- Review existing overseas investment applications to align with the revised FEM (OI) Directions, 2022.
- Advise clients on the need to verify that the overseas fund is 'duly regulated' by the host jurisdiction's financial sector regulator.
Who it affects
Category-I Authorised Dealer Banks, Listed and unlisted Indian companies, Resident individuals making overseas portfolio investments, Investment funds and vehicles in IFSCs
What types of instruments are now covered under OPI?
OPI now includes investment in 'units or any other instrument (by whatever name called)' issued by an overseas investment fund that is duly regulated by the host jurisdiction's financial sector regulator.
Can unlisted Indian entities invest in overseas funds directly?
Yes, but only in funds set up in International Financial Services Centres (IFSCs). For funds outside IFSCs, only listed Indian companies and resident individuals are permitted.
Does this circular change the limits or approval requirements for OPI?
No, the circular does not alter existing limits or approval requirements. It only clarifies and expands the scope of permissible instruments and eligible entities for OPI.