What changed
The automatic route cap for total overseas direct investment in JVs/WOSs was cut from 400% to 100% of net worth. The same 100% limit now applies to investments in unincorporated entities in energy and natural resources. Any ODI exceeding 100% must go through the RBI approval route.
What it means for you
Indian companies will face a tighter leash on outbound investments without prior RBI nod, potentially slowing capital outflows. Banks must now scrutinize ODI proposals more closely, ensuring net worth calculations are accurate and approvals sought for amounts above 100%. Existing JVs/WOSs are unaffected, but fresh proposals face stricter limits.
What you must do
- Update internal ODI processing guidelines to reflect the new 100% net worth automatic route limit.
- Verify net worth from the latest audited balance sheet before approving any ODI under automatic route.
- Flag any ODI proposal exceeding 100% net worth for mandatory RBI approval route processing.
- Communicate the revised limits to corporate customers and constituents promptly.
- Ensure compliance with FEMA regulations and maintain records for audit purposes.
Who it affects
Category-I Authorised Dealer Banks, Indian companies making overseas direct investments, Corporate treasuries and finance teams of Indian parties, Navaratna PSUs, ONGC Videsh, and Oil India (exempted)
Does this circular apply to existing overseas JVs or WOSs?
No, the new limits apply only to fresh ODI proposals on a prospective basis. Existing JVs and WOSs set up under earlier regulations are not affected.
What is the new limit for ODI in energy and natural resources unincorporated entities?
The automatic route limit for such investments has been reduced from 400% to 100% of the investing Indian company's net worth, as per the last audited balance sheet.
Are any entities exempt from the reduced limit?
Yes, Navaratna PSUs, ONGC Videsh Limited, and Oil India Ltd can continue investing in overseas oil sector entities without any limit under the automatic route, subject to government approval.