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Can overseas direct investment be made in any activity? What are the prohibited activities for overseas investment?

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posted Jul 26 by Sagar Sharma

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An Indian Party can make overseas direct investment in any bonafide activity.
Real estate as defined in Notification No. FEMA 120/RB-2004 dated July 7, 2004 and banking business are the prohibited sectors for overseas direct investment. Real estate business means buying and selling of real estate or trading in Transferable Development Rights (TDRs) but does not include development of townships, construction of residential/commercial premises, roads or bridges.
However, Indian banks operating in India can set up JVs/WOSs abroad provided they obtain clearance under the Banking Regulation Act, 1949, from the Department of Banking Regulation (DBR), CO, RBI.

An overseas JV / WOS, having direct or indirect equity participation by an Indian party, shall not offer financial products linked to Indian Rupee (e.g. non-deliverable trades involving foreign currency, rupee exchange rates, stock indices linked to Indian market, etc.) without the specific approval of the Reserve Bank. Any incidence of such product facilitation would be treated as a contravention of the extant FEMA regulations and would consequently attract action under the relevant provisions of FEMA, 1999.
It may be noted that, for undertaking activities in the financial services sector, certain additional conditions as specified in Regulation 7 of the Notification ibid should be adhered to

answer Jul 28 by Reshmi S
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