The following are the disadvantages of FDI: 
Exploiting Natural Resources:
The FDI Companies deplete natural resources like water, forest, mines etc. As a result such resources are not available for the usage of common man in the host country.
Heavy Outflow of capital:
Foreign companies are said to take away huge funds in the form of dividend, royalty fees etc. This causes a huge outflow of capital from the host country.
Not Transferring Technology:
Some foreign enterprises do not transfer the technology to developing countries. They mostly transfer second hand technology to the host country. They keep the fundamental aspects of technology with the parent company. In such case, the host country may not get the advantage of technology transfer and consequent economic development.
Exploiting Cheap Labour:
Foreign enterprises employ cheap labour force at a lower pay in developing countries. They do not employ local people for higher posts in the management. Further they do not extend the privileges they usually give to the employees in their home country to the employees of the host country. Thus they are stated to exploit the labour in developing countries.
Creating Monopolistic Environment:
Multi-National Companies (MNCs) which enter the host country through FDI route create monopolistic conditions in the host countries through their market power. They may not create competitive environment in the host country. Contrarily they may affect the competition altogether and establish supremacy.

The FII can be defined as an investment made by a Non-resident in equity of domestic company without intention of acquiring management control. FIls are the investments made by an individual investor or an investment fund, into the financial markets of another nation. Organisations like hedge funds, insurance companies, pension funds and mutual funds can be called as institutional investors. Foreign Institutional Investors play a very important role in Indian economy. From 1992, Foreign Institutional Investors (FIls) have been allowed to invest in all securities traded on the primary and secondary markets, including shares, debentures, and warrants issued by companies. Over 1450 foreign institutional investors have registered their names with the Securities and Exchange Board of India (SEBI), the regulator for the securities market in India.

Commercial Banks:
Most of the commercial banks extend foreign currency loans for promoting business opportunities. The loans and services of various types, provided by banks differ from country to country
International Agencies and. Development Banks:
International agencies and Development banks play an important role to promote international trade and business. They provide term loans and grants. to promote the development of economically backward areas in the world. International Finance Corporation (IFC), EXIM Bank and Asian Development Bank are the agencies operating at International level to meet the needs of the international finance.
International Capital Markets:
Modern organisations including multinational companies depend upon sizeable borrowings in rupees as well as in foreign currencies. Prominent financial instruments used for this purpose are Depository Receipts.

1. First of all, a company hands over the shares to a Domestic Custodian Bank (DCB)
2. Then DCB requests the American Depository Bank (ADB) to issue the shares in the form of ADRs
3. ADB converts the issue which are in rupees into US dollars
4. Finally, ADB issues them to the intending investors.

1. The company issuing GDRs hands over its shares to one Domestic Custodian Bank (DCB).
2. The DCB requests the Overseas Depository Bank (ODB) situated in the foreign country for issuing the shares as GDR.
3. The ODB converts the shares shown in rupees into GDR which are denominated in US dollars.
4. Finally, ODB issues them to the intending investors.