What changed
Indian companies can now invest in excess of 400% of net worth in energy and natural resources sectors (oil, gas, coal, mineral ores) with prior RBI approval. The automatic route limit for such investments remains at 400% of net worth. The facility to invest in overseas unincorporated oil entities without limit under the automatic route has been extended to ONGC Videsh Ltd and Oil India Ltd, subject to Government of India approval, and other Indian entities can now invest up to 400% of net worth under automatic route for such entities.
What it means for you
Banks must now process applications for overseas investments in energy and natural resources sectors beyond 400% of net worth with prior RBI approval. For unincorporated oil entities, AD Category-I banks can allow remittances up to 400% of net worth for other Indian entities, provided Board Resolution and competent authority approval are in place. All such investments require reporting in form ODI and Annual Performance Report.
What you must do
- Refer cases of investment in energy/natural resources sectors exceeding 400% of net worth to RBI for prior approval as per A.P. (Dir Series) Circular No. 68 dated June 1, 2007.
- For other Indian entities investing in overseas unincorporated oil entities, allow remittances up to 400% of net worth only after verifying Board Resolution and competent authority approval.
- Ensure all investments in unincorporated entities overseas comply with reporting requirements in form ODI and Annual Performance Report.
- Update internal procedures to reflect the extended automatic route for Navaratna PSUs, ONGC Videsh Ltd, and Oil India Ltd for oil sector unincorporated entities.
Who it affects
AD Category-I banks, Indian companies investing in energy and natural resources sectors overseas, Navaratna PSUs, ONGC Videsh Ltd, Oil India Ltd, Other Indian entities investing in overseas unincorporated oil entities
What is the new limit for overseas investment in energy and natural resources sectors under automatic route?
The automatic route limit remains at 400% of net worth as per last audited balance sheet. Investments beyond this require prior RBI approval.
Which entities can invest in overseas unincorporated oil entities without any limit?
Navaratna PSUs, ONGC Videsh Ltd (OVL), and Oil India Ltd (OIL) can invest without limit, subject to Government of India approval.
What reporting is required for investments in overseas unincorporated entities?
All such investments must be reported in form ODI, including Annual Performance Report (APR), as per FEMA 120/RB-2004 regulations.