The Hindu Business Line : RBI eases overseas investment norms

Indian corporates will now find it much more easier to provide guarantee for their overseas investment or to disinvest from their foreign venture. The Reserve Bank of India today issued a notification liberalising the procedure for overseas investment.

As per the new norms, corporates can offer any form of guarantee for their overseas investment under the automatic route, provided all financial commitments are within 200 per cent of their net worth and the guarantee amount is specified upfront.

Accordingly, companies can offer corporate, personal, primary or collateral guarantees. Guarantees by wholly-owned subsidiaries (WOS), sister concerns, joint ventures (JVs) or associates of a company will also be permitted. At present, only the promoter company is permitted to offer guarantees on behalf of its wholly-owned subsidiaries or joint ventures under the automatic route. Personal, collateral and third party guarantees require prior approval of the RBI on a case-by-case basis.

Guarantees issued by banks in India in favour of subsidiaries or joint ventures abroad will be outside this ceiling and subject to prudential norms issued by the RBI.

The RBI has also permitted Indian companies to disinvest without its approval where the JV or WOS are listed on the overseas stock exchange, the Indian promoter company is listed in India and has a net worth of not less than Rs 100 crore, the Indian promoter is an unlisted company and the investment in overseas venture does not exceed $10 million.

In order to allow recognised exporters with a proven track record and a consistently high export performance to enjoy the benefits of globalisation and liberalisation, the RBI has allowed proprietary and unregistered partnership firms to set up a JV or WOS outside India. Until now, only registered firms were allowed to invest in or set up JVs abroad.