What changed
Earlier, overseas investment in unincorporated entities was allowed only for the oil sector up to 400% of net worth. Now, RBI has extended the automatic route to allow Indian companies to join international consortia for constructing and maintaining submarine cable systems on co-ownership basis.
What it means for you
Banks can now process remittances for such investments without prior RBI approval, subject to compliance checks. This opens a new avenue for Indian telecom and infrastructure firms to participate in global undersea cable projects, potentially boosting cross-border data connectivity and reducing costs.
What you must do
- Verify that the investing Indian company holds a valid DoT licence for International Long Distance Services.
- Obtain a certified copy of the Board Resolution approving the investment before processing remittances.
- Ensure the investment is reported in the format prescribed in A.P. (DIR Series) Circular No. 68 dated June 1, 2007.
- Report the transaction to RBI as per A.P. (DIR Series) Circular No. 36 dated February 24, 2010 for allotment of a Unique Identification Number.
Who it affects
AD Category-I banks processing overseas direct investment remittances, Indian telecom companies with International Long Distance Services licence, Indian entities seeking to invest in submarine cable consortia
What is the maximum investment limit under this circular?
The circular does not specify a new limit; it only liberalises the route for submarine cable consortia. The earlier oil sector limit of 400% of net worth remains unchanged for that sector.
Do we need prior RBI approval for each remittance?
No, the investment is under the automatic route, so banks can process remittances after ensuring the company has the required DoT licence and board resolution.
What reporting is required after the investment?
The Indian entity must report to the AD bank in the format from Circular No. 68/2007, and the bank must report to RBI as per Circular No. 36/2010 for a Unique Identification Number.