FEMA overseas investment omnibus route update May 2026: 400% net worth limit and the new bona fide business test

The Reserve Bank of India's amendment to the Foreign Exchange Management (Overseas Investment) Regulations, 2022 and the corresponding Master Direction on Direct Investment by Residents in Joint Venture/Wholly Owned Subsidiary Abroad, notified on May 26, 2026, raises the omnibus route limit for outbound investments from 300 percent of net worth to 400 percent, effective June 1, 2026. This is the third revision of the omnibus limit since the FEMA OI framework was substantially re-engineered in August 2022, and it reflects the increasing scale of Indian outbound investment activity that the previous limit had begun to constrain.

The omnibus route enables Indian resident entities (companies, LLPs, partnership firms) to make overseas direct investments and overseas portfolio investments without prior RBI approval, subject to compliance with the bona fide business test, sector-specific carve-outs, and post-facto reporting. The 400 percent limit is measured against the audited net worth as per the latest financial statements (FY 2024-25 financials for investments made in June 2026 through March 2027). For a mid-cap Indian company with ₹1,000 crore net worth, the omnibus headroom is now ₹4,000 crore, up from ₹3,000 crore under the previous limit.

The bona fide business test is the substantive gatekeeper of the omnibus route, and the May 2026 amendment articulates it more clearly than prior versions of the Master Direction. Three elements must be satisfied: the investee entity must have bona fide business operations (not a shell or holding-only structure used for round-tripping or tax structuring), the investment must be commercially substantial (not a token investment used merely to establish a foreign affiliate), and the Indian investor must demonstrate a strategic rationale (downstream investment, market access, technology acquisition, or supply chain integration). The bona fide business test is documented through a board resolution and a supporting strategic rationale memo prepared at the time of remittance, and the Authorised Dealer (AD) bank handling the remittance retains the memo for audit.

The sector-specific carve-outs that operate outside the omnibus route remain unchanged. Real estate investments outside India are restricted and can only be made through specified vehicles such as real estate investment trusts in approved jurisdictions. Banking and insurance investments require sector-specific RBI or IRDAI approval. Investments in jurisdictions on the FATF non-cooperative jurisdiction list (currently North Korea, Iran, Myanmar) require government route approval under Press Note 3. Strategic sector investments, defence-related, dual-use technology, sensitive infrastructure, require Press Note 3 approval regardless of investment size.

The compliance workflow for an omnibus route investment runs through five steps: (a) board resolution authorising the investment with the strategic rationale, (b) net worth certification by a registered Chartered Accountant covering the proposed investment amount within the 400 percent limit, (c) Authorised Dealer bank submission of the Form ODI Part I with supporting documents, (d) outward remittance through the AD bank, and (e) Form APR (Annual Performance Report) filing within 6 months of the investee company's financial year-end. Non-filing of Form APR is the most common FEMA contravention in the outbound investment space and triggers compounding under Section 13 of FEMA.

The reporting obligations for downstream changes are increasingly enforced. Disinvestment, restructuring of the investee entity, change in beneficial ownership, and write-offs or impairments all require reporting through Form ODI Part II within 30 days of the event. The RBI's FIRMS portal has been the reporting interface since 2019, and the 2026 amendment introduces a new event-based reporting field for ESG-related developments at the investee entity, reflecting the broader trend toward ESG-aware capital flow monitoring.

KAMRIT's FEMA desk handles outbound investment structuring, bona fide business test documentation, Form ODI submission through AD bank, and the ongoing APR and event-reporting compliance.