ODI Rationalization: Grandfathering 400% Limit for Pre-Aug 14 Commitments
Current · Source: Reserve Bank of India · RBI/2013-14/220 · issued 04 Sep 2013 · ~2 min read
Quick answerRBI clarifies that financial commitments made on or before August 14, 2013, under the earlier 400% of networth automatic route are grandfathered and need no unwinding or RBI approval. Fresh commitments now capped at 100% of networth, except those funded via EEFC, ADR/GDR, or eligible ECB.
The rule, in the simplest words
If you promised to invest money in a foreign company before August 14, 2013, and that promise was up to 400% of your company's networth (total assets minus debts), that old promise is still okay and you don't need to cancel it or ask RBI for permission.
For any new promises to invest money in a foreign company, you can only promise up to 100% of your company's networth without asking RBI first. If you want to promise more, you must get RBI's special permission.
The 100% limit does not apply if you use money from your EEFC account (a special foreign currency account), or from ADRs/GDRs (shares sold to foreign investors), or from eligible ECBs (loans from foreign banks). For those, you can still use the old 400% limit.
How it plays out — a real example
Ravi, a forex & trade-finance officer in Indore, is helping a client who wants to send money to their existing joint venture in Dubai. The client shows a contract signed on July 1, 2013, promising to invest 300% of their networth. Ravi checks the date and confirms it's before August 14, 2013, so he allows the remittance without needing RBI approval, but he carefully documents the contract and reports it to RBI after the money is sent.
What changed
RBI issued clarifications on overseas direct investment (ODI) rules, confirming that commitments made before August 14, 2013, under the old 400% networth limit remain valid without unwinding. Fresh financial commitments in existing or new JV/WOS are now restricted to 100% of networth under automatic route, with higher limits only for EEFC, ADR/GDR, or eligible ECB-funded commitments.
What it means for you
Banks must ensure that any remittance for pre-August 14, 2013 commitments is backed by verifiable contracts and reported post facto to RBI. For new ODI proposals, the 100% networth cap applies strictly, and any excess requires prior RBI approval. This grandfathering protects existing investments but tightens future outflows, impacting corporate expansion plans.
What you must do
Verify and document all pre-August 14, 2013 financial commitments for JV/WOS before permitting remittances.
Report all such grandfathered cases post facto to RBI immediately after remittance.
Apply the 100% networth cap for fresh ODI commitments under automatic route; route any excess through RBI approval.
Ensure customers are aware that EEFC, ADR/GDR, and eligible ECB-funded commitments are exempt from the 100% limit.
Who it affects
Category-I Authorised Dealer Banks, Indian companies making overseas direct investments, Indian parties with existing JV/WOS abroad
❓ Common questions
Can we process remittances for a JV/WOS commitment made before August 14, 2013, under the 400% limit?
Yes, provided the commitment was validly contracted on or before August 14, 2013. The AD bank must verify the contract's authenticity and report the case post facto to RBI.
What is the current automatic route limit for fresh ODI financial commitments?
The automatic route limit is 100% of the Indian party's net worth. Commitments funded via EEFC, ADR/GDR, or eligible ECB are exempt from this cap.
Do we need RBI approval for any ODI commitment exceeding 100% of networth?
Yes, unless the funding source is EEFC, ADR/GDR, or eligible ECB. For all other cases, prior RBI approval is mandatory.
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/220
A.P. (DIR Series) Circular No.30
September 04, 2013
To
All Category-I Authorised Dealer Banks
Madam / Sir,
Overseas Direct Investments – Rationalization/Clarifications
Attention of Authorised Dealer Category - I (AD Category - I) banks is invited to the A.P. (DIR Series) Circular No. 23 dated August 14, 2013 and the Notification No. FEMA.120/RB-2004 dated July 7, 2004 , as amended from time to time. In this connection, Reserve Bank has been receiving queries from various stakeholders including Authorised Dealers and Indian companies. All such queries have been collated and are annexed to this circular along with the answers / clarifications.
2. It is clarified that all the financial commitments made on or before August 14, 2013, in compliance with the earlier limit of 400% of the networth of the Indian Party under the automatic route will continue to be allowed. In other words, such investments shall not be subject to any unwinding or approval from the Reserve Bank.
3. Attention of Authorised Dealer Category - I (AD Category - I) banks is also invited to the provisions under Regulation 6 of the Notification ibid , in terms of which the limit of financial commitments for an Indian Party (presently 100% of its net worth) shall not apply to the financial commitments funded out of EEFC account of the Indian Party or out of funds raised by way of ADRs / GDRs by the Indian Party, as hitherto.
4. It has been decided further to retain the limit of 400% of the net worth of the Indian Party for the financial commitments funded by way of eligible External Commercial Borrowing (ECB) raised by the Indian Party as per the extant ECB guidelines issued by the Reserve Bank of India from time to time.
5. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
6. Necessary amendments to the Notification, ibid, shall be notified separately.
7. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(C.D. Srinivasan)
Chief General Manager
Encl: Annex
[Annex to A.P.(DIR Series)
Circular No.30 dated 04.09.2013
Clarifications on Overseas Direct Investments
S. No.
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/220 · issued 04 Sep 2013. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (Category-I Authorised Dealer Banks, Indian companies making overseas direct investments, Indian parties with existing JV/WOS abroad), your first concrete step on “ODI Rationalization: Grandfathering 400% Limit for Pre-Aug 14 Commitments” is: “Verify and document all pre-August 14, 2013 financial commitments for JV/WOS before permitting remittances.” (RBI issued this 04 Sep 2013).
Circular: RBI/2013-14/220 -- ODI Rationalization: Grandfathering 400% Limit for Pre-Aug 14 Commitments
Issued: 04 Sep 2013
Action required: Verify and document all pre-August 14, 2013 financial commitments for JV/WOS before permitting remittances.
Action required: Report all such grandfathered cases post facto to RBI immediately after remittance.
Action required: Apply the 100% networth cap for fresh ODI commitments under automatic route; route any excess through RBI approval.
Action required: Ensure customers are aware that EEFC, ADR/GDR, and eligible ECB-funded commitments are exempt from the 100% limit.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8369&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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