Reserve Bank of India Reduces Overseas Direct Investment Threshold

SUNNYVALE, Calif. - Aug. 21, 2013 - PRLog -- The Reserve Bank of India (RBI) has recently announced the reduction of thresholds concerning Overseas Direct Investment (ODI) by a domestic company for setting up an entity abroad, with immediate effect. The new provisions are expected to stabilize the Indian Rupee and reduce foreign exchange outflows, says Nair & Co.’s International Expansion Services  (http://www.nair-co.com/)Team.

Existing Provision

The total ODI by a domestic party, in its Joint Venture (JV) or Wholly Owned Subsidiary (WOS) overseas must not surpass 400% of the net worth of the Indian Party (under Automatic Route).

Newly Introduced Provision

*  The RBI cuts down the current threshold from 400% to 100%. This means that the ODI by a domestic party in its JV or WOS abroad must now not surpass 100% of the net worth of the Indian Party, under the Automatic Route.

*  If ODIs by an Indian party go beyond 100% of the net worth, they will be considered under the Approval Route by the RBI.

The new provision will apply to all fresh ODI proposals on a prospective basis. However, it will not be applicable to the JVs and WOSs established as per the existing norms.

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