What changed
The overseas direct investment limit for Indian parties (excluding registered partnership firms) was raised from 200% to 300% of net worth. Financial commitment now includes 100% of guarantees issued (instead of 50%) for determining total overseas investment. Listed Indian companies can now invest up to 35% of net worth in eligible foreign equities and bonds, up from 25%.
What it means for you
Indian corporates get greater headroom to expand abroad without prior RBI approval, boosting M&A and greenfield opportunities. Banks must update their automatic route processing limits and ensure guarantee calculations reflect the full amount. The higher portfolio investment cap allows listed firms to diversify overseas holdings more aggressively.
What you must do
- Update internal systems to allow automatic route approvals up to 300% of net worth for Indian companies (excluding partnership firms).
- Revise financial commitment calculations to include 100% of guarantees issued by the investing entity or related parties.
- Inform customers about the enhanced portfolio investment limit of 35% of net worth for listed Indian companies.
- Ensure compliance with all other unchanged terms under Regulation 6B for portfolio investments.
Who it affects
AD Category-I banks processing overseas investment remittances, Indian companies (excluding registered partnership firms) investing abroad, Listed Indian companies making portfolio investments in foreign equities and bonds, Registered partnership firms (limit remains at 200% of net worth)
Does the enhanced 300% limit apply to partnership firms?
No, the 300% limit applies only to Indian parties that are companies incorporated in India or created under an Act of Parliament. Registered partnership firms continue to have a 200% of net worth limit.
How is financial commitment now calculated for guarantees?
Previously, only 50% of guarantees issued counted toward financial commitment. Now, 100% of guarantees issued by the investing company, promoter, group company, or associate in India must be included.
Are there any changes to the eligibility criteria for portfolio investments?
No, only the limit has been raised to 35% of net worth. All other conditions under Regulation 6B, such as the foreign company being listed and having at least 10% shareholding in an Indian listed company, remain unchanged.