The Reserve Bank of India’s (RBI) foreign exchange department has taken a move on the foreign investments by the companies amid the weakening rupee, spike in the gold prices and consistent rise in crude oil prices.
RBI has asked the companies to explain the intent and rationale behind investments, the governance structure of overseas entities, and future plans, according to a person aware of the development, reported the Economic Times.
India’s total annual ODI (Overseas Direct Investment), comprising equity, loans and invoked guarantees, spiked from $14.5 billion in FY24 to $27 billion in FY26with Singapore, the US and the UAE are among the top ODI destinations.
As per the existing rules, an Indian company or LLP can remit up to four times its net worth for overseas direct investment, provided the activity qualifies as a bona fide business. RBI approval is typically required once annual ODI crosses $1 billion.
The overseas direct investment regulations encompass four specific scenarios. Acquisition of any unlisted equity capital of a foreign entity, subscription to the Memorandum of Association (MoA) of a foreign entity, investment of 10% or more of the paid-up equity capital of a listed foreign entity, and investment with control, even if holding is less than 10% in a listed entity.
A company or limited liability partnership (LLP) can annually remit up to four times its net worth for ODI. RBI approval is needed once a company’s annual ODI crosses $1 billion.
The Foreign Portfolio Investors (FPIs) continue to exit from the Indian markets. The situation worsen after the outbreak of Iran War. As per the NSDL data, FPIs sold equity worth Rs 27,177 crores through the secondary market in May, as of now.