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RBI restored the limit of Overseas Direct Investment taken under automatic route

Jul 4, 2014 14:06 IST

The Reserve Bank of India (RBI) on 3 July 2014 restored the limit of Overseas Direct Investment (ODI) by an Indian company under the automatic route of Foreign Exchange Management Act, 2004.

With this decision now an Indian company can undertake financial commitment or invest up to 400 percent of the net worth in all its Joint Ventures (JVs) and/or Wholly Owned Subsidiaries (WOSs) abroad.

However, RBI decided that any financial commitment exceeding one billion US Dollars or its equivalent in a financial year will require prior approval of the Reserve Bank. This rule is applicable even if total commitment undertaken by an Indian company falls within the eligible limit.

Earlier in August 2013, RBI reduced the ODI limit to 100 percent of net worth of company from 400 percent for all Indian companies by considering the prevailed macro economic situation. The decision was taken in order to control the unprecedented appreciation of the dollar when the rupee touched an all-time low of 68.80 rupees.

However, the restriction was not applicable on public sector firms like Oil India and ONGC Videsh.

Overseas direct investments (ODI)
ODI is the reverse of Foreign Direct Investment (FDI) i.e. Indian direct investment abroad.

ODI brings host of benefits along with it. These are: promotes economic co-operation between India and the host countries; helps in transfer of technology and skills; enables sharing of results of Research & Development; provides access to the global market; enables promotion of the brand image; generates employment and aids in utilization of raw materials available in India and the host country.

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Read more Current Affairs on: RBI , Overseas Direct Investments , Financial Commitment , 400 percent

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