Foreign investment is governed by the Foreign Exchange Management Act, 1999 and the rules and regulations made under it, with the RBI issuing Master Directions that banks apply day to day. Inward investment, its reporting and later transfers run through authorised dealer banks, and breaches are enforced by the Directorate of Enforcement. Bank onboarding follows the RBI's 2025 know-your-customer directions, updated in October 2026.
The FEMA framework
DPIIT sets FDI policy, and the Department of Economic Affairs gives it legal force as amendments to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 under FEMA. Reporting requirements sit in the RBI's Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, and the Directorate of Enforcement enforces FEMA.
The RBI consolidates the operating rules in Master Directions. The Master Direction on Foreign Investment in India was updated up to 15 June 2026, the one on external commercial borrowings, trade credits and structured obligations on 8 September 2026, and the one on reporting under FEMA on 1 October 2026. Use the current version, since banks apply it to every transaction.123456
Pricing, downstream investment and bank onboarding
Pricing guidelines apply to issues and transfers involving non-residents, and an Indian company with foreign investment that invests downstream must follow the entry route, sector caps, pricing guidelines and conditions as if it were a foreign investor. This matters for group restructuring inside India.
Banks onboard companies under the Reserve Bank of India (Commercial Banks – Know Your Customer) Directions, 2025, updated as on 1 October 2026. Expect to provide beneficial ownership information along with constitutional and identity documents.78
| Master Direction | Latest update shown by RBI | Use |
|---|---|---|
| Foreign Investment in India | Updated up to 15 June 2026 | Issue and transfer of shares to non-residents, reporting |
| External Commercial Borrowings, Trade Credits and Structured Obligations | Updated as on 8 September 2026 | Foreign-currency and rupee borrowing from abroad |
| Reporting under FEMA | Updated as on 1 October 2026 | Returns submitted by authorised dealer banks |
| Establishment of branch, liaison or project office | Updated as on 18 May 2021 | Foreign companies operating without a subsidiary |
| Commercial Banks – Know Your Customer Directions, 2025 | Updated as on 1 October 2026 | Bank account onboarding |
How it works, step by step
- Open an account with an authorised dealer bank and complete know-your-customer checks8Bank (RBI KYC Directions, 2025)
- Receive investment funds through banking channels and complete reporting under the RBI reporting regulations25Authorised dealer bank and RBI
- Apply pricing guidelines to share issues and transfers involving non-residents7Company and valuer
No timings or fees are shown unless an official source states them.
Documents usually needed
- Certificate of incorporation, memorandum and articles
- Board resolution authorising account opening and signatories
- Beneficial ownership details
- Valuation report for share issues or transfers involving non-residents
- Foreign inward remittance details for each tranche of investment
Common mistakes
- Missing FEMA reporting deadlines on share issues, which leads to compounding proceedings.
- Using a superseded Master Direction or an older FDI summary.
- Treating downstream investment by an Indian subsidiary as purely domestic.
- Issuing shares to a non-resident below the price permitted by the pricing guidelines.
When the business crosses borders
- Foreign-currency borrowing from a parent is regulated under the external commercial borrowing framework.
- Investments from land-border-country investors require approval or reporting under the revised rules before funds are accepted.
- Banks may ask for apostilled parent-company documents during onboarding.
Questions businesses ask
Who supervises foreign investment compliance day to day?
Authorised dealer banks apply the RBI's Master Directions and submit reports to the RBI. The Directorate of Enforcement enforces FEMA.35
Does an Indian subsidiary's investment in another Indian company count as foreign investment?
If the investing company has foreign investment and is foreign-owned or controlled, its downstream investment must follow the entry route, caps, pricing guidelines and conditions.7
What this guide does not yet confirm
These points need checking with a qualified local professional in India before you rely on them.
- Reporting forms and deadlines (for example the form for reporting share issues and its time limit, the annual foreign liabilities and assets return) could not be confirmed: RBI Master Direction pages and PDFs could not yet be checked or returned verification pages.
- Rules on dividend repatriation, current account convertibility and remittance of sale proceeds were not source-checked.
- External commercial borrowing limits and all-in cost ceilings were not covered.
- Anti-money-laundering obligations under the Prevention of Money-laundering Act, 2002 beyond bank onboarding were not covered.
Sources and review status
Each statement is numbered to the source it was checked against. We use official sources where we can, and each statement says whether it was checked against an official or a secondary source. Sources last checked on 19 October 2026. None of it has been professionally reviewed yet: it is research checked against official and secondary sources by WONE Global, not legal or tax advice.
FDI policy issued by DPIIT through the Consolidated FDI Policy, Press Notes and Press Releases is notified by the Department of Economic Affairs as amendments to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 under the Foreign Exchange Management Act, 1999. Central rule.
Reporting of foreign investment is governed by the RBI's Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019. Central rule (RBI under FEMA).
Reporting forms and deadlines were not confirmed because RBI pages could not yet be checked.
The Directorate of Enforcement under the Ministry of Finance enforces FEMA, including the foreign investment rules. Central rule.
The RBI Master Direction on Foreign Investment in India (issued 4 January 2018) is shown as updated up to 15 June 2026, and the Master Direction on External Commercial Borrowings, Trade Credits and Structured Obligations as updated on 8 September 2026. Central rule (RBI).
The listing was opened; the Master Direction texts themselves could not yet be checked.
The RBI Master Direction on Reporting under FEMA sets the reports that authorised persons and authorised dealer Category-I banks must submit, and is shown as updated on 1 October 2026. Central rule (RBI).
The page loaded once; later loads returned unrelated content, so its detailed provisions were not reviewed.
The RBI's Master Direction on establishment of branch, liaison or project offices by foreign entities is shown as updated as on 18 May 2021. Central rule (RBI).
Downstream investment by an Indian entity that is foreign-owned or foreign-controlled counts as indirect foreign investment and must comply with the entry route, sectoral caps, pricing guidelines and other conditions. Central rule (FDI Policy and FEMA Non-debt Instruments Rules).
Commercial banks apply the Reserve Bank of India (Commercial Banks – Know Your Customer) Directions, 2025, shown as updated as on 1 October 2026. Separate KYC directions apply to small finance, payments, local area, regional rural and co-operative banks. Central rule (RBI).
The listing was opened; the directions' content was not reviewed.
Branch, liaison and project offices of foreign entities are governed by the FEMA (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016, with operating rules in an RBI Master Direction last updated as on 18 May 2021. Central rule (RBI under FEMA, 1999).
The regulations are also named in DPIIT's FAQs on FDI Policy (FAQ 7). The Master Direction text itself could not yet be checked, so eligibility criteria are not stated here.
Questions on this topic
8 statements on banking, foreign exchange and repatriation in India
