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RBI restores overseas investment limit for Indian companies

04 July 2014

The Reserve Bank of India (RBI) on Thursday announced the restoration of the overseas investment limit of Indian companies to 400 per cent of each the firm's net worth after the rupee rebounded from last year's record low levels against the dollar.

RBI had, in October last year, cut the overseas investment limit for companies to 100 per cent of their net worth from 400 per cent, in a move to curb dollar outflows and stem the rupee's slide.

With some improvement in rupee value, RBI has now decided to restore the limit of overseas direct investments (ODI)/ financial commitment (FC) to be undertaken by an Indian party under the automatic route to the limit prevailing, as per the extant FEMA provisions, prior to 14 August 2013, RBI said in a release.

However, RBI said, any financial commitment exceeding $1 billion (or its equivalent) in a financial year would require its prior approval even when the total financial commitment of the Indian party is within the eligible limit under the automatic route (ie, within 400 per cent of the net worth as per the last audited balance sheet).

The restriction on capital outflow was seen as delaying overseas acquisitions and investment plans by India Inc at a time when many companies are scouting markets abroad to beat the domestic economic slowdown.

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