Overseas direct investment is eased for firms

Overseas direct investment is eased for firms

Under the modified norms, only 50 per cent of the amount of performance guarantee provided by Indian companies to overseas ventures will be taken into account while computing the overall exposure limit.

Indian companies are allowed financial commitments in overseas ventures upto 400 per cent of their net worth. Under the old norms, 100 per cent of the performance guarantee is taken into account while calculating the overall exposure limit of an Indian company.
The Indian companies, RBI said, will also be permitted to increase their overseas exposure to beyond 400 per cent limit with its prior approval.

In order to provide more operational flexibility to the Indian corporates, RBI has decided to allow them to write-off capital and other receivables like loans, royalty, technical know-how fees and management fees in respect to those joint ventures and wholly owned subsidiaries in which they have more than 51 per cent stake.

While the listed Indian companies are permitted to write off capital and other receivables upto 25 per cent of the equity investment under the automatic route, the unlisted companies can take advantage of the said provision after seeking RBI approval.
The RBI has also relaxed norms for repatriation of funds in those cases where the amount of return is less than the original investment.

It has allowed listed companies to write off investments under automatic route if the net worth of the entity is less than Rs 100 crore and overseas investment does not exceed US$10 million. The RBI has also decided to allow Indian companies to issue corporate guarantees to the second level of operating subsidiaries under the approval route, provided it holds more than 51 per cent equity in the overseas venture.