Overseas investment made easier for companies

Relaxing the recent curbs on outward investments, Reserve Bank of India (RBI) on Wednesday said a company will be allowed to invest up to 400% of its net worth provided it has raised the funds through external commercial borrowings (ECBs).

Relaxing the recent curbs on outward investments, Reserve Bank of India (RBI) on Wednesday said a company will be allowed to invest up to 400% of its net worth provided it has raised the funds through external commercial borrowings (ECBs).

The RBI also clarified that the curbs on capital outflows imposed on August 14 will not apply with retrospective effect.

"It has been decided further to retain the limit of 400% of the net worth of the Indian party for the financial commitments funded by way of eligible ECB raised by the Indian party as per the extant ECB guidelines issued by the RBI from time to time," said the central bank in clarifications on its last month’s overseas direct investment (ODI) guidelines.

Last month, the RBI had reduced the ODI limit to 100% of a company’s net worth from 400% for all companies.

However, the restriction was not applicable on public sector firms such as Oil India and ONGC Videsh.

The RBI had announced the curbs on ODI in the context of the prevailing macro-economic situation.

"It was not the intention of the Reserve Bank of India to restrict bona-fide and genuine overseas direct investment transactions by Indian companies," the central bank said in the statement.