RBI expands overseas fund investment scope for Indian entities
Current · Source: Reserve Bank of India · RBI/2024-25/41 · issued 07 Jun 2024 · ~2 min read
Quick answerRBI now allows Indian entities to invest in any instrument issued by overseas regulated funds, not just 'units'. Unlisted Indian entities can also invest in IFSC-based funds. This clarifies and broadens OPI rules under FEM (OI) Directions, 2022.
The rule, in the simplest words
Indian companies and people can now invest in any type of investment (like shares or bonds) from a foreign fund that is watched by that country's financial rule-keeper (regulator), not just 'units' (a kind of fund share).
Unlisted Indian companies (not on the stock market) can now also invest in funds set up in India's special finance zones (IFSCs), which was only for listed companies and individuals before.
Banks must update their rules and tell customers about these new, wider investment options, and check that the foreign fund is properly regulated (watched by a financial sector regulator).
How it plays out — a real example
A forex & trade-finance officer in Indore, Priya, gets a call from a local unlisted jewellery company wanting to invest in a fund based in Gujarat's IFSC. She checks the new RBI rule and confirms the company is now allowed, then advises them to verify the fund is regulated by the IFSC authority before proceeding.
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
❓ Common questions
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.
📜 Read the original circular — full text as issued by RBI
RBI/2024-25/41
A.P. (DIR Series) Circular No. 09
June 07, 2024
To
All Category-I Authorised Dealer Banks
Madam/ Sir
Foreign Exchange Management (Overseas Investment) Directions, 2022 - Investments in Overseas Funds
Attention of Category-I Authorised Dealer Banks is invited to Paragraph 1(ix)(e) of Foreign Exchange Management (Overseas Investment) Directions, 2022, issued vide A.P. (DIR Series) Circular No.12 dated August 22, 2022 , in terms of which, investment (including sponsor contribution) in units of any investment fund overseas, duly regulated by the regulator for the financial sector in the host jurisdiction, shall be considered as Overseas Portfolio Investment. Further, as per the provisions of Paragraph 1(ix)(e) and Paragraph 24(1) of FEM (OI) Directions, 2022, investments can be made in “units” of investment funds.
2. In this regard, in view of the diverse regulatory framework governing investment funds across various jurisdictions and to provide clarity, the following amendments are carried out in the Foreign Exchange Management (Overseas Investment) Directions, 2022:
(a) Existing Paragraph 1(ix)(e) of FEM (OI) Directions, 2022 is replaced with the following:
“The investment (including sponsor contribution) in units or any other instrument (by whatever name called) issued by an investment fund overseas, duly regulated by the regulator for the financial sector in the host jurisdiction, shall be treated as OPI. Accordingly, in jurisdictions other than IFSCs, listed Indian companies and resident individuals may make such investment. Whereas in IFSCs, an unlisted Indian entity also may make such OPI in units or any other instrument (by whatever name called) issued by an investment fund or vehicle, in terms of schedule V of the OI Rules subject to limits, as applicable.
Explanation: ‘investment fund overseas, duly regulated’ for the purpose of this para shall also include funds whose activities are regulated by financial sector regulator of host country or jurisdiction through a fund manager .”
(b) Existing Paragraph 24(1) of FEM (OI) Directions, 2022 is replaced with the following:
“ A person resident in India, being an Indian entity or a resident individual, may make investment (including sponsor contribution) in units or any other instrument (by whatever name called) issued by an investment fund or vehicle set up in an IFSC, as OPI. Accordingly, in addition to listed Indian companies and resident individuals, unlisted Indian entities also may make such investment in IFSC.”
3. Foreign Exchange Management (Overseas Investments) Directions, 2022 issued vide A.P. (DIR Series) Circular No.12 dated August 22, 2022 , shall accordingly be updated to reflect the above changes. AD Category-I Banks may bring the contents of this circular to the notice of their constituents.
4. The directions in this circular have been issued under Section 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
Yours faithfully,
(N Senthil Kumar)
General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2024-25/41 · issued 07 Jun 2024. The plain-English explanation above is BankPulse’s own independent summary.
Review existing overseas investment applications to align with the revised FEM (OI) Directions, 2022.
📜 Compliance
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.
Advise clients on the need to verify that the overseas fund is 'duly regulated' by the host jurisdiction's financial sector regulator.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (Category-I Authorised Dealer Banks, Listed and unlisted Indian companies, Resident individuals making overseas portfolio investments, Investment funds and vehicles in IFSCs), your first concrete step on “RBI expands overseas fund investment scope for Indian entities” is: “Update internal policies and customer advisories to reflect the expanded definition of OPI instruments beyond 'units'.” (RBI issued this 07 Jun 2024).
Circular: RBI/2024-25/41 -- RBI expands overseas fund investment scope for Indian entities
Issued: 07 Jun 2024
Action required: Update internal policies and customer advisories to reflect the expanded definition of OPI instruments beyond 'units'.
Action required: Train compliance teams on the new eligibility for unlisted Indian entities to invest in IFSC-based funds.
Action required: Review existing overseas investment applications to align with the revised FEM (OI) Directions, 2022.
Action required: Advise clients on the need to verify that the overseas fund is 'duly regulated' by the host jurisdiction's financial sector regulator.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12691&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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