Relaxing the recent curbs on the outward investments, Reserve Bank on Wednesday said that a company will be allowed to invest up to 400 per cent of its net worth provided it has raised the funds through external commercial borrowings (ECBs).
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 per cent 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.
Clarifications on outbound investments come on a day when RBI Governor D. Subbarao demits office after completing five years in office.
Last month, RBI had reduced the overseas direct investment limit to 100 per cent of a company’s net worth from 400 per cent for all companies.
However, the restriction was not applicable on public sector firms like Oil India and ONGC Videsh.
The RBI had announced the curbs on ODI in the context of 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,” it said.
Issuing further clarification on remittance scheme, it said it can be used to acquire both listed and unlisted shares of an overseas company.
Resident individuals are permitted to make remittances for acquiring immovable property within the annual limit of USD 75,000 for already contracted cases before August 14, it said.