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
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.