India conserving its forex

Reserve Bank of India has today announced following measures to aim at rationalizing the Foreign Exchange outflows by Resident Indians.

a)    Reduced the limit for Overseas Direct Investment under automatic route from 400% of the net worth of an Indian Party to 100% of its net worth. Same limitations shall apply to companies investing in the energy and natural resources sectors.

Exempted investments from above restrictions would be investment made by Navratna PSUs, ONGC Videsh Limited and Oil India in overseas unincorporated entities and incorporated entities, in the oil sector.

b)    Any ODI in excess of 100% of the net worth shall be considered under the Approval Route by the Reserve Bank of India.

c)    Under Liberalised Remittance Scheme (LRS Scheme), it has been decided to reduce the limit for remittances made by Resident Individuals from USD 200,000 to USD 75,000 per financial year. It has also been allowed to set up Joint Venture (JV)/Wholly Owned Subsidiary (WOS) outside India under the ODI route within the revised LRS limit.

d)    LRS for acquisition of immovable property outside India directly or indirectly has also been prohibited.

Note: The above provisions shall come into effect with immediate effect (14 August 2013) and would apply to all fresh Overseas Direct Investment proposals on a prospective basis but would not apply to the existing JV/WOS set up under the extant regulations.

Dheeraj Khanna, Senior Attorney, specializes in structuring businesses and IP.

Disclaimer: This is not a legal opinion and should not be construed as one. Please speak with your attorney for any advice.

Advertisements